ISLAMABAD  -  Pakistani rupee has plunged to ever low Rs189 against dollar in the interbank market amid political uncertainty in the country and massive outflow of foreign exchange reserves of $728 million in last week.

Pakistani rupee has broken all previous records and tumbled to above Rs189.25 against the dollar in the interbank market. However, later, it closed at Rs188.18. Rupee is under pressure mainly due to the depleting foreign exchange reserves, widening current account deficit, ongoing political instability in the country and stalling of an International Monetary Fund (IMF) loan facility. US dollar has appreciated by Rs3 over Wednesday’s close of Rs186.13 to reach a new high of Rs189.25 in the interbank market.

The currency depreciation would bring another wave of inflation besides increasing overall public debt of the country, which are already on the higher side.

Market sources believed that rupee might remain under pressure until some stability in political situation of the country. Pakistani rupee has depreciated by 19.44 percent (or Rs30.64) since the start of the current fiscal year on July 1, 2021.

The country’s foreign exchange reserves are depleting swiftly due to the repayment of previous loans. The reserves had declined by $3.628 billion in just two weeks period at a time when talks between Pakistan and IMF had halted due to the political situation of the country. “During the week ended on 01 April 2022, SBP reserves decreased by $728 million to $11,319.2 million, largely due to the debt repayment and government payment pertaining to settlement of an arbitration award related to a mining project,” the State Bank of Pakistan said on Thursday. The total liquid foreign reserves held by the country stood at $17.476 billion as of 01 April 2022. Foreign reserves held by the State Bank of Pakistan are $11.319 billion and net foreign reserves held by commercial banks are $6.157 billion.

Another reason behind currency depreciation is widening of current account deficit. The current account deficit had widened to $12.099 billion in first eight months (July to February) of the current fiscal year against a surplus of $994 million in the same period of last fiscal year. The IMF had projected current account deficit of $13 billion or 4 percent of GDP for ongoing financial year. However, the CAD had already surged to $12.099 billion in eight months of FY2022. The current higher oil and food commodities are likely to further widen the CAD in remaining four months (March to June) of the current fiscal year.

The stalling of an IMF loan facility is also putting pressure on local currency. The IMF on Monday said that it would engage with new government of Pakistan (once it is formed) on policies to promote macroeconomic stability, and enquire about intentions vis-a-vis program engagement. “The Fund looks forward to continue its support to Pakistan and, once a new government is formed, we will engage on policies to promote macroeconomic stability, and enquire about intentions vis-a-vis program engagement. There is no concept of suspension within IMF programs,” the IMF said.