In a significant development on Tuesday, the value of the rupee plummeted to an unprecedented low, experiencing a 0.6% depreciation against the US dollar in the interbank market. The decline attributed to the recent relaxation of import restrictions, which has subsequently increased the demand for the US dollar.
According to the Exchange Companies Association of Pakistan (ECAP), the local currency experienced a sharp drop of 1.87 against the greenback, with the intraday trade witnessing the dollar trading at 299 rupees.
This downturn has broken the previous record low of 298.93, which registered on May 11, showcasing the severity of the current situation.
In the preceding days, the rupee had shown a downward trend. On the day before, it had closed at 297.13 against the US dollar, compared to the previous Friday’s closing rate of Rs295.78.
Tahir Abbas, the Head of Research at Arif Habib, shared his insights on the situation. He projected that the rupee might oscillate between 295 and 305 against the dollar in the immediate future. Abbas attributed this declining trajectory to the relaxation of import restrictions, as well as the clearance of backlog related to goods and services. He also highlighted that multinational corporations repatriating their profits contributed to the outflow of rupee.
Providing further analysis, Adnan Agar, the Director of AA Commodities, offered his perspective on the matter. Agar suggested that the depreciation of the rupee predominantly linked to political factors. The uncertainty surrounding the upcoming general elections has led to concerns about potential delays in meeting commitments made to the International Monetary Fund (IMF) and other global lenders.
Agar emphasized that political instability, particularly with a caretaker government in power, raises questions about future investments and loans for the country. He indicated that this uncertainty is a primary cause of the rupee’s depreciation and expects the situation to persist until there is more clarity regarding the political landscape.
As Pakistan navigates this economic challenge, experts and analysts continue to monitor the situation closely, emphasizing the interconnectedness of political stability and currency value. The rupee’s trajectory remains closely linked to these key developments on both the domestic and international fronts.
