| Welcome to Global Village Space

Sunday, February 25, 2024

Rupee plunges to Rs 271.35 against US dollar

The local currency resumed its downward slide as it depreciated by Rs 2.52 in the interbank market on Thursday, February 2.

The rupee has now settled at  271.35 against the US dollar after the International Monetary Fund visited Pakistan for the ninth review. However, the local currency touched 272.17 against the dollar during the intra-day trade. 

Moreover, the Pakistani currency has continued to depreciate since the start of the year and reached a record-high exchange rate of Rs 268 last week. In addition to the rupee depreciation and fuel price hike, inflation has further added to the economic uncertainty of the country. The country urgently needs the $ 1 billion tranche in the Extended Fund Facility (EFF) program. 

Read more: Record High Exchange Rate of USD against Pak Rupee

An IMF mission arrived in Pakistan on January 31 for the ninth review of stalled $ 7 billion bailout. The Fund in its first phase of technical talks has set certain conditions for Pakistan, in order to unlock the disbursements and foreign inflows. 

IMF demands Pakistan:

IMF has demanded to jack up the fuel prices, increase the domestic taxes, increase the tariff on electricity, and declare the assets of government officials. In the technical level talks, the Fund has rejected the Circular Debt Management Plan (CDMP) presented by the government. It has directed to raise the electricity tariff by Rs 12.50 per unit to restrict the additional subsidy at Rs 335 billion for the current fiscal year. The international lenders have also demanded the revision of the government’s policies to restrict the loss in the power sector, and the Washington-based lender called it “unrealistic”. 

Read more: IMF demands to declare assets of Pakistan’s civil…

Furthermore, the revised plan required an additional subsidy of Rs 675 billion despite raising the power tariff in the range of Rs7 per unit through quarterly tariff adjustment in the first two quarters of 2023 and Rs1.64 for the third quarter from June to August. 

The official source suggests;

“The IMF has opposed the certain basis of the revised CDMP and asks the government to raise the tariff in the range of Rs11 to Rs12.50 per unit so that the requirement of additional subsidy could be reduced to half from its existing levels of Rs675 billion for the current fiscal year”

Moreover, the inflation rate has also increased to the highest levels in the last 48 years. According to the Consumer Price Index (CPI), the inflation for the month of January has clocked in at 27%.