PKR faces continued decline, drops by 0.76 Rupees in intraday trade

August 28, 2023 (MLN): The Pakistani Rupee (PKR) continues to face significant challenges, remaining under considerable stress as it has experienced a further decline of 0.76 rupees during intraday trade.

The local unit was quoted at PKR 301.72/301.97 [12:30pm PST] with the trades being reported at 301.76 per USD while in the open market, PKR is being traded at 314/317 per USD.

The interbank rate earlier this month breached the 300 mark, a psychological barrier, and the local unit has lost 16.26 rupees or 5.39% in the current fiscal year, while seeing a depreciation of 75.36 rupees or 24.97% in the current calendar year.

It is worth noting that the depreciation of the local unit from 200 to 300 level against the USD occurred within a 15-month time span.

Adding to the complexity is the open market rate which currently hovers around 314/317 per USD.

This takes the gap between the interbank and open market rate to 4.18%, and has exceeded the recommended 1.25% threshold set by the International Monetary Fund (IMF) for the last 16 consecutive days.

The interbank market has a severe shortage of dollars, however, they are readily available in the open market at a black (market) price.

There needs to be a sound strategy to eliminate the black market.

Meanwhile, the continuous PKR depreciation in the interbank stems from several factors. A notable factor weighing down the Rupee is the International Monetary Fund (IMF)’s condition for a more market-determined exchange rate to secure financial aid.

This has limited the government's ability to control the rupee through trade restrictions.

As a result, import restrictions have been lifted, leading to an increased demand for dollars and subsequently weakening the rupee.

Additionally, Pakistan's dependence on imported oil exposes the country to the constant rise of international oil prices in the past few weeks, which also affects PKR.

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