Dollar reaches new high in Pakistan, soars past Pkr210 in interbank trade

The price of US dollar reached a new high in Pakistan as it rose above Pakr210 against the local currency in the interbank market on Monday (20 June). 

According to the Forex Association of Pakistan (FAP), the rupee depreciated sharply by Pkr2.55 to hit an all-time low of Pkr210.3 against the dollar from Friday's close of Pkr207.75. In the Pakistani open market the greenback was trading at Pkr212 on Monday, reports The Dawn. 

Market experts, it said, have called for the Pak government's immediate attention over the depreciating rupee with respect to curtailing import bills through cutting unnecessary expenditures, warning that otherwise, in the absence of the deal with the International Monetary Fund (IMF), Pakistan's foreign exchange reserves would keep depleting.

Meanwhile, Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, said that the market was under severe distress but the authorities seemed to be oblivious to it. "It seems as if another condition put forward by the IMF is the devaluation of rupee because no one seems to care about it and there's silence everywhere."

He cautioned that if this trend persists, Pakistan could head towards a default like Sri Lanka. "It is extremely crucial for the government to take steps or else the country will default."

According to the State Bank of Pakistan, the country's reserves have fallen by another $234 million to close just below $15 billion. The Pak central bank's share in these reserves is just under $9 billion.

"With almost no free liquidity, it is expected that the central bank does not have the resources to control the market," it pointed out.

"With low levels of inflows and substantial outflows, especially end of June, SBP is dipping in to commercial bank's share of reserves to square payments, resulting in low or negative swap premiums."

Keeping this in mind, it went on, there was no stopping the rupee from further losses.

"On average, it (the market) is losing Re1 every day and will only stop when Pakistan receives fresh inflows. If we were to assume that that inflow will be from IMF, then the government should focus all its resources on having IMF on board and jump the queue as we can not afford even another week [like this]," the overview added.