Rupee freefalls to 268.3 against Dollars in interbank market

Forex deplete to alarming level of $3.7bn; fall enters second day after government ends control.

KARACHI: The Pakistani currency kept a freefall for a second straight day, plunging by a fresh 4.78percent (or Rs12.87) to a new all-time low of Rs268.30 against the us$ in the interbank market at around 10:30 am on Friday.

The currency dropped by 9.61% (or Rs24.54) to Rs255.43 yesterday, making it the single-day low. As a result, the value of the rupee has decreased by Rs37.41, or nearly 14%, in just two days.

After the government, in compliance with an International Monetary Fund (IMF) condition, stopped manipulating the rupee’s value against the dollar and let the market determine it, the currency experienced a sharp decline.

To avoid a potentially disastrous default on international payments, Pakistan fully supports restarting the dormant $6.5 billion IMF loan programme.

After the government caved to the IMF’s demands, loan negotiations resumed.

The central bank released its weekly report on Thursday, showing that the country’s foreign exchange reserves had dropped by $923 million, to an alarming $3.7 billion. There is only enough money in the bank to cover imports for two or three weeks.

In addition, Pakistan has committed to repaying $7 billion in foreign debt during the last five months (Feb-Jun) of the current fiscal year 2023. In the following three years, from FY24 through FY26, it will repay an additional $74 billion.

In the near future, the country will be able to borrow between $3 and $4 billion from multilateral and bilateral creditors like the Fund, World Bank, and Asian Development Bank thanks to the reactivation of the IMF programme.

Moreover, the rupee depreciation will boost the flow of employees’ foreign funds and export earnings through correct channels. To put it another way, this will help the country’s foreign exchange reserves.