Domestic political tension and negative economic indicators kept Pakistan’s rupee under pressure as the currency closed over the 186 level against the US dollar for the first time after a substantial 0.48% fall in the inter-bank market on Wednesday.
As per the State Bank of Pakistan (SBP), the rupee closed at 186.13, its weakest level in history, after a day-on-day depreciation of 90 paisas.
The rupee has now lost over 18% since its most-recent high in May last year, while on a fiscal year to date (FYTD) basis, the local currency has depreciated by over 15%. Since March 2022 alone, the rupee has nearly 5% against the dollar.
“All this political uncertainty needs to be cleared,” Saad Hashmey, Executive Director at BMA Capital, told Business Recorder.
“Prior to the ongoing political turmoil, we were on a reform path as the country’s current account deficit was declining. However, as there is no government now, that reform path is now unclear. Naturally, the rupee will fall,” said Hashmey.
The market expert added that clarity on the political end would revamp the rupee back to its ‘pre crisis’ level of 180.
Meanwhile, the local business community has also expressed concern over the devaluation of the local currency. Karachi Chamber of Commerce & Industry (KCCI) president Muhammad Idrees urged the central bank to play its role and devise an effective strategy to stop further devaluation.
“Although experts are attributing rupee devaluation to political uncertainty, the SBP, being the regulator, has to play a role. Otherwise, it will create a lot of problems for the economy," he said in a statement.
The Pakistan Business Council (PBC) also expressed concern over the rate of depletion of foreign exchange reserves and called for urgent attention.
“Correct the price of fuel, impose rationing,” said the PBC, adding that the said decisions might be unpopular and difficult, but can be taken by the caretaker setup. “Then address more fundamental reforms which call for consensus,” it added.