Rupee’s downward spiral continues, interbank rate at Rs242

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CARACHI:

The Pakistani rupee hit a new all-time low of over 242 rupees against the US dollar in the interbank market around noon on Thursday.

The national currency fell 2.64% (or Rs 6.24) to Rs 242.26 around 12:08 p.m. from Wednesday’s close of Rs 236.02.

With that, the currency has plunged almost 15% (or Rs31.31) in the past 10 business days.

The latest sharp drop in the rupee is seen after the government announced a high five-month current account (CAD) deficit of $2.3 billion for the month of June.

This took the full-year CAD to a second all-time high of $17.40 billion in the fiscal year that ended June 30, 2022. The massive CAD increase was funded by reserves exchange rate of the country.

As a result, reserves have shrunk to just six to seven weeks’ import cover at $9.3 billion as of July 15, 2022, according to the central bank’s weekly update last Thursday.

The rupiah continued to slide alongside declining reserves, an analyst said.

On the other hand, the resumption of foreign financing is at least four weeks away, as the IMF’s executive board is due to meet and give final approval for the resumption of its lending program to Pakistan at the end of August 2022.

Until then, Pakistan must manage import payments and debt repayment with the limited foreign exchange reserves available.

In the meantime, pressure on the rupee would further increase and political instability would play its part in hammering the local currency.

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