An undated image of a currency dealer counting Rs500 notes. — AFP

The rupee tumbled to a record low as the cash-strapped nation continues to grapple with the political turmoil which threatens to spiral into a fullblown crisis. 

In the interbank market, the local unit plunged Rs8.78, or 3.02%, against the US dollar on Thursday trading at 299 in the interbank market at 1.17pm.

The new rate is just Re1 away from the much-anticipated rate of Rs300 per dollar.

The rupee depreciation has piled up foreign debt without taking new external loans, making imports further expensive for Pakistan, which faced a six-decade high inflation reading at 36.4% in April 2023.

Financial pundits believe that the rupee has been depreciating due to political and social unrest caused after the arrest of the PTI chief.

Moreover, the dollar demand supply gap has also widened as the exporters have stopped selling US currency on speculations that rupee would depreciated further versus the greenback. On the other hand, importers are seen rushing to buy dollars.

This gap in the demand and supply of the foreign currency in the interbank market have contributed to the rupee’s devaluation.

Political situation would improve in a day or two and help the currency stabilise around the current levels or partially recover ground against the greenback.

Dr Khaqan Najeeb, former finance ministry adviser, said that continuing political instability has taken a toll on market sentiment pushing the Pakistani rupee to hit a record low.

“The heightened political turmoil has come at a time when the economy has been in the doldrums for months largely due to an acute balance of payment crisis, with falling State Bank of Pakistan reserves barely covering a month of highly controlled imports,” he commented a day earlier. 

More to follow…

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