Dollar continues its ascending march against rupee on Monday with the greenback gaining Rs4.25 in interbank trade. According to the Forex Association of Pakistan, the dollar was trading at a record Rs216 against the local currency at 3:12pm, up Rs5, or 2.4 per cent, from Friday’s close of Rs210.95. The dollar eventually closed at Rs215.2, with the local currency going down by 1.97pc, according to data shared by the State Bank of Pakistan (SBP).
Subsequently after reaching a peak of Rs211.93 on June 22, the dollar started decreasing for a short period of time and fell as low as of Rs204.56 on July 4. However, the strength gained by the rupee after $2.3 billion Chinese inflows diminished within few weeks, as the dollar broke the spell of rupee’s rise and strengthened Rs2.38 in the interbank market on July 5, the first appreciation in the new fiscal year. Since then, the greenback has constantly been increasing with a slight reversal of the trend on July 15 — the day the IMF announced it had reached a staff-level agreement with the government. However, the rupee reversed its gains the very next day with analysts ascribing it to low inflows and import payments.
Also Read: Pak Rupee’s Recovery Sustainable?
Saad bin Naseer, director of Mettis Global, a web-based financial data and analytics portal, has linked greenback’s gain to political uncertainity in the country where PTI has defeated PML-N by winning 15 seats which means that Hamza Shehbaz would be unable to gain majority seats needed in the re-elections on July 22. These elections have raised concerns about coalition government thus creating political and economic uncertainty.
Yesterday's Punjab by-elections have increased political uncertainty which breeds economic instability. Despite Miftah's assurances of forth coming help from overseas friends, Rupee is sliding. We need to announce general elections to kill this uncertainty. pic.twitter.com/PuYthS5GG5
— Shaukat Tarin (@shaukat_tarin) July 18, 2022
“The rupee is under pressure as the market is uncertain about the new setup and the decisions it will take to stabilise the economy, especially the fate of bilateral inflows currently being negotiated by the current finance minister.” Analyst Komal Mansoor said the rupee had depreciated because of yesterday’s political events.”The PTI’s win has cast doubt on the sustainability of the current government and the sentiment has again turned negative,” she said. She predicted that the rupee would have a “rollercoaster ride this week” until the central bank steps in.
Rupee in a free fall. Has crossed 215. This political uncertainty is bleeding the economy and inflicting tremendous pain on the people. Time to stop this badly conceived, badly executed, totally gone wrong experiment. Pakistan cannot be made to suffer anymore for poor decisions
— Asad Umar (@Asad_Umar) July 18, 2022
Meanwhile, Exchange Companies Association of Pakistan General Secretary Zafar Paracha blames the government and state institutions. As government and the International Monetary Fund (IMF) had reached an agreement, oil prices had dropped internationally but the interest rate hiked, which meant that people would have to pay rate on interest in the rupee rather than the dollar. “The dollar should have dropped [in price] because of this and people should have gone towards bank deposits. We believe the dollar is rising because of the government’s [complacency] since the government or other state institutions do not appear to be concerned and it seems like they are fulfilling some target given to them by the IMF.” Paracha also shared his fears regarding the fact that foreign investors were reluctant to invest in the country because they had “no idea” how high the dollar would rise, while the growth rate of remittances had dropped because overseas Pakistanis are not happy.