Rupee continued to extend losses on Tuesday as investors kept a close eye on the talks between Pakistan and the International Monetary Fund (IMF) which are currently at a stalemate.
The local unit closed at 224.11 against the US dollar after registering a meagre decline of 0.09% in the interbank market compared to Monday’s close of 223.91.
An IMF review for the release of the next tranche under bailout funding has been pending since September.
Federal Minister for Finance and Revenue Ishaq Dar claimed last week that Pakistan met all targets for the review. However, the IMF resident chief said discussions with the Pakistani “authorities in these areas are ongoing, especially as not all end-September quantitative targets have been met”.
The local currency also remained under pressure as demand from importers seeking to pay their bills increased.
A currency dealer explained that banks are often urged to only settle import amounts that match the bank’s export amounts. The interbank market’s equilibrium is preserved by managing demand and supply.
Pakistan made a payment of $1 billion Sukuk on Friday. However, the investors remained concerned about a fast depletion of the foreign reserves amid dried dollar inflows. The loss of foreign exchange reserves is unquestionably being caused by the servicing and repayment of the debt.
Despite the rupee’s 21% decline against the greenback so far in 2022, there is a lot of uncertainty surrounding the Pakistani currency. Since 2019, Pakistan has adopted a market-based exchange rate regime.
Even though the official exchange rate has recently remained in the Rs221-225 range, the black market rate is currently trading at a premium of more than 10% at Rs240-250, The News reported.
Except for a few currencies available to travellers at a premium of 3%, there is scarcely any foreign currency supply in that market as a result of the central bank’s strict regulations for exchange companies.
The resurgence of the black market has been badly affecting dollar inflows, particularly inward remittances. Analysts expect the rupee to reach 270 against US dollar by June 2023.