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Thursday, September 21, 2023

Dollar crosses PKR 189 amid political uncertainty

Owing to the political uncertainty, there are reports that importers are facing problems in securing dollars to make payments as the demand for dollars is outstripping the supply.

As political uncertainty rages on in Pakistan, it has caused the Pakistani rupee to continue in a downward spiral. According to reports, the Pakistani rupee was selling at above Rs. 189 against the dollar in the interbank market during intra-day trading.

A day earlier, the rupee had hit Rs. 186.13 at the close of trading. On Thursday, it slid by Rs. 2.87, hitting Rs. 189, the lowest value of the rupee against the greenback in Pakistan’s history. The domestic currency also lost ground in the open market. As per details, it is currently trading at over Rs. 190 against the dollar.

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Important to note, the Pakistani rupee’s downward slide has occurred for the 17th successive working day, except on March 24. Moreover, the Karachi Chamber of Commerce and Industry (KCCI) urged Tuesday the State Bank of Pakistan (SBP) to intervene to stem and stop further depreciation of the rupee.

Pakistani rupee under pressure

According to experts, there are two main factors keeping the rupee under pressure. The first reason is of course Pakistan’s political turmoil. Currently, Pakistan has no functioning government.

To clarify, after the rejection of the no-confidence motion, President Dr. Arif Alvi dissolved all assemblies, leaving Pakistan without a federal cabinet or an elected prime minister. Earlier this week, President Dr. Arif directed Imran Khan to continue as prime minister until the formation of an interim government. However, with the Supreme Court hearing on the no-confidence motion underway, the country finds itself in a constitutional limbo.

Read more: Pakistan’s top court to hear arguments on constitutional crisis

On the other hand, another factor is the apparent pause in International Monetary Fund (IMF) bailout program for Pakistan. This comes as IMF announced that it will engage in policies to “promote macroeconomic stability and enquire about intentions vis-a-vis program engagement” with the new government.

In May 2019, Pakistan and the IMF reached a staff-level agreement on economic policies for a three-year Extended Fund Facility (EFF). Under the agreement, Pakistan was to receive about $6 billion for a period of 39 months, and so far it has received almost half it.

Owing to the uncertainty, there are reports that importers are facing problems in securing dollars to make payments as the demand for dollars is more than the supply. To clarify, in times of currency depreciation, panic buying is triggered in the market, creating a shortage of dollars.

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