KARACHI: Pakistani rupee depreciated against the dollar by two rupees seventy-seven paisas on Monday, reaching an all-new record level of Rs202.83 paisas in the interbank market, amid the increasing fuel prices and uncertainty over the International Monetary Fund bailout package.
“The recent fall of rupee value against dollar is because of the fear of confidence among investors. Moody’s recent report and rumours over the government’s decision to freeze foreign currency accounts have created panic among investors,” Fahad Rauf, the head of research for Ismail Iqbal Securities.
This is an intra-day trade update. The greenback is being sold at Rs204 in the open market. The two currency markets, which include open and interbank, are run on confidence, according to economic experts. In order to support traders and investors, rates of currencies are one to two rupees less in the interbank market.
Rauf, who has a BSc (Hons) degree from Oxford Brookes University, was of the view that the decrease in the value of the rupee against the dollar was a “natural rate” because of the fundamental reason that every year currencies depreciate and appreciate view of the competitive market. But, the current downward slide was not because of such a reason.
The economy will be better when the IMF programme will be revived and the money will flow into the country from different sources (other global lenders).
The stock market situation comes at a time when Prime Minister Shehbaz Sharif will host stakeholders for a “grand dialogue” on the charter of the economy. The economic expert said that it was too early to comment on the business conference as it is held for future planning.
The unfortunate scenario was that the oil prices increased in the global market and the internal situation led to the rupee devaluation. There would be significant inflation in the coming months as the government has together passed on the impact of such situations to the public, he said in reply to a query.
“The decision was taken to save the country from getting default,” Rauf said.
Long-term planning: It will put the country’s economy in the right direction. Pakistan does not plan long term when it comes to the economy as every government makes a policy for two to three years.
Loan: Rauf stressed the need for overcoming the deficit (in simple terms the expenses are greater than income). Current account deficit is the gap between the payments and receipts from foreign countries.
Fiscal account deficit (when the government expenditure is greater than tax collection): There is a need for imposing taxes on the “un-augmented” sector, which includes agriculture and real estate. He called for increasing the tax to GDP ratio (the ratio of the tax revenue of a country compared to its GDP).