The rupee plunged to an all-time low against the US dollar on Tuesday after losing Rs1.14, closing at Rs185.2 in the interbank market.
On Sunday, National Assembly (NA) Deputy Speaker Qasim Suri prorogued the no-confidence motion against Prime Minister Imran Khan, after which President Arif Alvi dissolved the NA on the prime minister’s advice.
The legality of these moves is currently being debated in the Supreme Court, which is expected to issue an order soon. The impact of the situation put pressure on the rupee after which it breached the Rs185-mark for the first time ever earlier Tuesday. Mettis Global – a web-based financial data and analytics portal – said that the rupee had lost its worth by more than 3 per cent or Rs5.4 since March 8, when the no-confidence motion was submitted in the NA.
Exchange Companies Association of Pakistan General Secretary Zafar Paracha called Tuesday a “black day in the history of Pakistan”. “All exchange companies are selling 99pc of their foreign reserves in the interbank,” he said. “The market is suffering because of the worsening political situation.”
Paracha added that the news regarding the International Monetary Fund (IMF) Programme further came as a blow. On Monday, the IMF’s resident representative in Islamabad, Esther Perez Ruiz, said that the fund would engage with the new government once it was formed.
“The Fund looks forward to continue its support to Pakistan and, once a new government is formed, we will engage on policies to promote macroeconomic stability, and inquire about intentions vis-a-vis programme engagement,” she said, adding “There is no concept of suspension within IMF programmes.”
Meanwhile, Paracha said that the market had pinned hopes on an early verdict by the Supreme Court. Malik Bostan, chairman of the Pakistan Forex Association, also urged the apex court to pass an early decision to prevent further damage to the economy.
Meanwhile, the State Bank of Pakistan (SBP) on Tuesday injected Rs 2,414.1 billion into the money market for six days as a reverse repo purchase through its open market operation. The rate of return accepted is 9.76 percent per annum, says SBP release.
On the other hand, the Karachi Chamber of Commerce and Industry (KCCI) urged the SBP to intervene to stem the continued fall of the rupee against the US dollar. KCCI President Mohammad Idrees aired concern over the domestic unit plunging to a record low of Rs186 in the open market against the greenback and urged the central bank to play its role to stop further depreciation of the rupee, which, he said, is taking a heavy toll on the country’s economy, especially inflation.
Though experts have attributed the depreciation to the ongoing political turmoil in the country, the State Bank being a regulator has a role to play to stabilise the exchange rate or else it would create numerous problems for the economy, he warned.
“Rising dollar against rupee was raising the cost of doing business, making Pakistani goods non-competitive in the export markets and unaffordable for the common man at the local markets as the impact of rising dollar value is usually passed onto end-users,” Idrees said. staff report
