The greenback gained to record levels OF Dollar against the rupee on Thursday as it climbed a further Rs. 3.40 in the inter-bank market and was being traded at Rs. 165.
The dollar has gained Rs. 6.33 in the past three days as a back-to-back reduction in interest rates catalyzes foreign capital flight from Pakistan’s debt market.
On Wednesday, the rupee had fallen 1.63% or Rs.2.60 versus the dollar to close at Rs. 161.60. It had closed at 159 to the greenback in the previous session.
In open trade, the rupee had fallen Rs. 1.50 to end at Rs. 160 per dollar. Traders said foreign investors were upset over the sudden decision to slash the policy rate by the central bank and resorted to panic selling of treasury bills (T-bills).
The market is under a float regime that indicates further depreciation in the parity in coming days. The State Bank of Pakistan (SBP) lowered policy rate by a cumulative 225 basis points to 11% in two monetary policy announcements in a week.
This emergency move was designed to help the struggling economy cope with the fallout of a preventive lockdown as the coronavirus disease breaks out nationwide.
Foreign investors sold a net $95 million worth of T-bills on March 24, the SBP’s data showed. With this repatriation, total divestment in March reached $1.501 billion.
SBP lowers policy rate to 11% for stabilizing the economy
The State Bank of Pakistan has recently further lowered the interest rate to 11 percent to ease pressure on the investment in the country. Pakistan is in the second-largest bracket of high-interest rates, 149th out of 166 countries, double the interest rate of 148 others.
Since most bank profits are out of govt bonds, because of the high interest, in effect SBP is making the govt pay banks’exorbitant profits. Having annunciated an excellent monetary policy, the State Bank of Pakistan (SBP) now has a responsibility to take bold steps by reducing interest rate significantly and instead of looking at the interests of stock market fat cats and banks’ profit margins.