The rupee plunged to a record low of Rs255.43 against USD in the interbank market, after the removal of the unofficial price cap on the exchange rate.
The PKR stood at the said rate after sliding 9.61 percent from yesterday’s close, according to reports.
Experts termed the plunge the largest single-day decline in both absolute and percentage terms so far.
In the open market, rupee traded at Rs255 per dollar, equaling a depreciation of Rs12 as compared to yesterday’s Rs243.
This occurrence brought the difference between the interbank and open market rate, to almost none.
Analysts say the local currency may fall to Rs250-260 against the greenback on eve of resumption of the IMF’s $7 billion loan agreement.
As the Pak Rupee continues to depreciate faster than expected, fears mount over the country’s worsening economic health. Widespread concerns over Pakistan’s ability to pay the import bill for essential items in the coming weeks, and to repay maturing debts in the coming year, have been growing for months.
The exchange rate has been hit exceptionally hard by a steep decline in the State Bank of Pakistan’s (SBP) foreign exchange reserves, which have shrunk to approximately $4.4 billion, the lowest in almost a decade.
The Pakistani currency last appreciated against the dollar on 1 December 2022, and that too only 0.12% to close at Rs. 223.69 to the greenback. The decline has been picking up momentum in recent days, as the rupee has been going down consistently during the last twenty trading sessions.
Amidst a critical scarcity of dollars, the gap between dollar exchange rates in the interbank and open markets has significantly spread out, which is drastically hurting the economy as well as diverting remittances from the legal banking channel to the ‘grey’ market, where the Pak Rupee opened at Rs. 238.75 to a dollar on Wednesday.
Economic growth prospects are also dismal, as the country grapples with a multitude of external and internal shocks.
As per a report by Arif Habib Ltd, “We believe, these measures are likely to get the program back on track and pave the way for the release of the next tranche of ~USD 1.2bn in Feb 2023. With the 10th review also due in early 2023 (1Q) – combining the two reviews remains a possibility though this may further delay the IMF disbursement.”