The Pakistani Rupee (PKR) continued its historic decline against the US Dollar (USD) for the fourth day in a row and depreciated by 10 paisas against the greenback in the interbank market today. It hit an intra-day low of Rs. 177.95 against the dollar during today’s open market session.
The local currency depreciated by 0.06 percent against the USD today and closed at another all-time low of Rs. 177.71, following its loss of 18 paisas when it closed at Rs. 177.61 in the interbank market on Thursday, 9 December.
The local currency has lost 1.13 percent on a month-to-date basis after recording another historic low today, and it has depreciated by 11.18 percent on a calendar-year-to-date basis. It notably continues its dismal run and has dashed the market’s hopes for an immediate recovery despite numerous fiscal fulfillments over the week.
Rupee Spillover
The Rupee continues its historic plunge as market players are finally coming to grips with the fundamental understanding of how loan facilities usually work in times of inflation and economic uncertainty. While borrowing usually helps governments determine how debt servicing can be improved for future benefits, the usual pullbacks of unsupervised market practices, coupled with the uninvited fiscal handicaps, heap pressure on financial instruments, including the currency.
To that effect, Pakistan’s borrowing from multiple financial sources has doubled during the first five months of the ongoing fiscal year. The government’s borrowing for budgetary support increased by 108 percent to Rs. 104 billion in the first five months of the current fiscal year to control the widening fiscal deficit.
The State Bank of Pakistan (SBP) has also had huge inflows of $3 billion from Saudi Arabia recently, which pushed the reserves to $25.1 billion. From 5 to 26 November, the foreign exchange reserves were depleted by over $1.5 billion. The SBP’s reserves declined by $1.31 billion and commercial banks’ reserves decreased by $211 million.
The outflow of the reserves was reported due to the heavy payment on account of the debt payments to various financial institutions. On the other hand, higher imports bill, the smuggling of dollars, and the purchase of dollars through commercial banks and open markets also impacted this trend.
Commenting on the local unit’s tumble to another historic low, the former Treasury Head of Chase Manhattan Bank, Asad Rizvi, remarked, “Net Reserves with SBP is up after receiving $3bn deposit, but during the week due [to] payments, it was reduced by $352mn to $18.658bn”.
He added, “To ease pressure on PKR, the size of settlement needs to be curtailed, as constant borrowing add[s] burden to the GOVT KITTY & increases DEBT”.
The PKR had a mixed showing of trends against the other major currencies. It posted blanket losses of two paisas against the Pound Sterling (GBP), and two paisas against both the UAE Dirham (AED) and the Saudi Riyal (SAR) in today’s interbank currency market.
Conversely, the rupee appreciated against the Australian Dollar (AUD) and the Canadian Dollar (CAD) and posted respective gains of 32 paisas and 53 paisas in today’s interbank currency market.
Source: Pro Pakistani