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Rupee closes at record low of 239.65 against dollar

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  • Pakistani rupee plunges to 239.65 after losing 0.74.
  • Rupee registers losses for 14th consecutive session.
  • Dollar was at an all-time high of 239.94 on July 28, 2022.

KARACHI: The Pakistani rupee continued to fall for the 14th consecutive session on Wednesday and hit a record historic low against the US dollar, with analysts expecting further depreciation of the local unit.

The rupee has been one of the worst performing currencies in the emerging markets and has fallen by nearly 9% so far this month owing to wide-ranging factors.

In the interbank market, the rupee plunged to 239.65 after losing 0.74, according to the data from the State Bank of Pakistan (SBP), down in value from the previous session’s close of 238.91.

The dollar now stands only Rs0.29 short of the all-time high level of Rs239.94 on July 28, 2022.

The heavy flooding and the lifting of a ban on imports have created pressure on the local unit, but the country is looking toward aid from friendly countries and multilateral and bilateral institutions to overcome the persisting economic crisis.

Floods have affected 33 million Pakistanis, inflicted billions of dollars in damage, and killed over 1,500 people — creating concern that Pakistan will not meet its debts.

Pakistan was able to resume the International Monetary Fund’s programme (IMF) and get a $3 billion rollover from Saudi Arabia, but the unprecedented floods have overshadowed everything else and led to a hit of at least $18 billion to the economy, which could go as high as $30 billion.

Samiullah Tariq, the head of research at Pak-Kuwait Investment Company, said: “[There’s] a greater demand than supply; floods have added to the import bill; aid hasn’t arrived in cash yet, but once it does, the liquidity position will ease.”

A weakening currency may worsen the price pressures after inflation surged to the highest in almost five decades. The nation is also grappling with the aftermath of a series of deadly floods and needs additional funds beyond the IMF’s $1.1 billion loan to avert a default.

The advent of floods and their negative effects on the country’s external account are to blame for the recent slide in the currency.

The loss of crops will now have to be made up for through imports and weak external flows, which have remained low since the signing of the IMF deal.

The $1.1 billion IMF loan tranche did help Pakistan improve sentiment, saving the country from default. However, additional inflows from the Middle East nations were anticipated to follow.

These inflows have not arrived yet, according to analysts.

In the past several months, investments and loans totalling $9 billion from Saudi Arabia, the United Arab Emirates, and Qatar have been promised to Pakistan.

While Saudi Arabia has already extended a $3 billion deposit that was due in December as part of that help for one year, the three countries have not yet distributed any new investments and have not provided a timeline for when they intend to do so.

The government is worried about a free fall of the rupee and is considering some steps to stabilise the foreign exchange market. Recently, the State Bank of Pakistan issued a show-cause notice to eight banks for selling dollars at prices higher than the current market rate, Finance Minister Miftah Ismail revealed over the weekend, to stop the rupee’s wild decline.

“The IMF loan was more to do with sentiment and was expected to be followed by inflows from other friendly countries,” said Sana Tawfik, economist at Arif Habib Ltd. in Karachi.

“These things were to materialize, but we don’t see any inflows yet.”

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Pakistan’s gold price increases by an additional Rs. 800 per tola.

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The price of yellow metal in the local market hit Rs247,300 on the first working day of the week, following a rise of Rs800 in a single day.

The cost of ten grams of 24-karat gold increased by Rs686 on Monday, making the current price Rs212,020.

In addition, the cost of 10 grams of 22-karat gold increased significantly, trading at Rs194,351.

These fluctuations are strongly correlated with shifts in the US dollar’s value, demonstrating the tight connection between gold prices and exchange rates. This emphasizes how local gold markets are impacted by variables related to the global economy.

The price of the precious metal dropped $16 on the international market on Monday, hitting $2,348 per ounce.

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A delegation from Pakistan travels to the US to bargain with the IMF for a new loan.

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The Pakistani delegation consists of the Governor of the State Bank of Pakistan, the Secretary of Finance, the Additional Secretary, and other individuals.

The Finance Minister was greeted at the airport by Pakistan’s Ambassador to the United States, Masood Khan, and Embassy staff.

The Finance Minister will meet with representatives of the World Bank and IMF while he is in the US.

The IMF and Pakistan are expected to negotiate next week, according to sources.

Sources claim that Islamabad will apply for a new credit package from the IMF.

The Finance Minister’s itinerary also includes meetings with members of think tanks and the world press.

Last month, Pakistan and the IMF came to a staff-level agreement over the third and final review of the $3 billion stand-by arrangement. Should the board of the global lender approve this deal, Pakistan will get approximately $1.1 billion.

Although a specific date has not been determined, the IMF board is anticipated to evaluate the case in late April, according to a spokeswoman.

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Pakistan’s petrol prices are anticipated to rise.

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The Oil and Gas Regulatory Authority (OGRA) will not disclose the anticipated increase in fuel prices until its work is finished, according to sources.

Prime Minister Shehbaz Sharif will receive the summary of the petrol price, and sources further stated that the new pricing will be revealed following his approval today.

Noteworthy to highlight is that Pakistan was previously ordered by the International Monetary Fund (IMF) to impose an 18% General Sales Tax (GST) on gasoline.

Details indicate that Pakistan was requested by the Monetary Fund to stop reducing sales tax on all goods, including gasoline.

To boost tax revenue, Pakistan’s recently elected government should impose a sales tax on petroleum items in addition to a Rs 60 charge.

High-speed diesel (HSD) was reduced by Rs3.32 per litre on March 31 but petrol prices increased by Rs9.66 per litre by the government.

In contrast to the reduction in the price of high-speed diesel (HSD) to Rs282.24 from Rs278.92, the price of gasoline jumped to Rs289.41 per litre.

The adjustments were brought about by a commensurate increase in the price of gasoline and a decline in the price of HSD on the global market, according to a statement released by the Finance Ministry.

According to the statement, the adjustment was made in accordance with government policy, which transfers pricing differences from the foreign market to the home market.

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