The Pakistani rupee slipped further on Wednesday against the US dollar. Pakistan’s Local Foreign Exchange Association has warned that panic is spreading in the currency market after this week’s sharp fall. According to a report by news agency Reuters, the Pakistani rupee had fallen by 2 per cent on Monday and 3 per cent on Tuesday.
The fall came despite Pakistan and the International Monetary Fund (IMF) reaching an initial level of agreement last week, paving the way for Pakistan to get a bailout package of $1.17 billion. On Wednesday morning, the Pakistani rupee declined to 225 Pakistani rupees against a dollar, from 228.41 Pakistani rupees on Friday.
Rating agency Fitch downgraded Pakistan’s sovereign debt rating from stable to negative in a report released on Wednesday morning. However, it has retained Pakistan’s long-term foreign-currency and issue default rating at”B-“. “There is panic in the market. I am afraid it (Pakistani rupee) will go down further,” said Zafar Paracha, secretary general of The Exchange Companies of Pakistan, a Pakistani foreign exchange association.
Paracha said he does not see any reason for the fall in the Pakistani rupee other than the possible pre-conditions of the IMF. Neither the government nor the IMF has said anything about the need for further depreciation in the rupee. However, Pakistan has recently adopted a market-based exchange rate on the advice of the IMF as part of the economic reform agenda.
In a tweet on Tuesday, the State Bank of Pakistan said,”The recent volatility in the rupee is a feature of the market based exchange rate system.” At the same time, he further said that the devaluation of the Pakistani rupee against the dollar is largely a global phenomenon.
Let us tell you that Pakistan is facing economic turmoil. Its foreign exchange reserves are rapidly depleting and with it its fiscal and current deficits are widening. Meanwhile, since December 21, the Pakistani rupee has depreciated by 18 per cent so far. Pakistan’s foreign exchange reserves have come down to $9.8 billion and it can hardly pay for 45 days of imports.