January 24, 2023 (MLN): Sinking further, the Pakistani rupee (PKR) has depreciated by 25 paisa against the US dollar on Tuesday as the currency settled the trade at PKR 230.4 per USD, compared to yesterday's closing of PKR 230.15 per USD.
During the session, the local unit traded in a range of 50 paisa, reaching an intraday high bid of 230.50 and a low offer of 230.15. In the open market, the PKR was traded at 240.5/240.98 per USD.
Delay of foreign inflows and melting reserves along with political upheaval are the main reasons behind PKR's freefall. The country is in a dire need of immediate dollar inflows.
According to media reports, the International Monetary Fund (IMF) has presented Pakistan with a set of seven demands that must be met before it can resume economic assistance to the country. These demands include the withdrawal of electric subsidies, linking gas prices to the international market, free-floating the dollar, and not blocking letters of credit (LCs).
However, the Pakistani government has expressed concern that implementing these demands could result in a significant increase in the price of essential items, affecting the country's citizens and businesses.
The withdrawal of electric subsidies, for example, could lead to a hike in electricity prices, making it more expensive for households and businesses to operate. Similarly, linking gas prices to the international market could result in higher costs for transportation and industry.
The government is also worried that free-floating the dollar could lead to further depreciation of the Pakistani rupee, making imports more expensive and making it more difficult for the country to service its external debt.
On the other hand, IMF has argued that these measures are necessary to address the country's economic imbalances and that they will help to stabilize the currency, reduce inflation and improve the balance of payments.
Analysts fraternity and economic experts are of the view that the government must find a way to balance the need to implement these measures with the need to protect businesses from the negative effects of price hikes.
All in all, the government is in a difficult position as it tries to find a way to meet the IMF's demands while also protecting the interests of the country's citizens and businesses.
It remains to be seen how this situation will play out and what measures the government will ultimately take to address the country's economic challenges.
Within open market, the Exchange Companies (ECs) have decided to remove cap from dollar in open market, Malik Bostan said in a video statement today.
Imposition of cap created a black market. Thus, inflows have reduced from official channels.
Meanwhile, the currency lost 30 paisa to the Pound Sterling as the day's closing quote stood at PKR 285.95 per GBP, while the previous session closed at PKR 285.65 per GBP.
On the other hand, PKR's value strengthened by 18 paisa against EUR which closed at PKR 251.01 at the interbank today.
On another note, within the money market, the State Bank of Pakistan (SBP) conducted an Open Market Operation (OMO) today, in which it injected Rs813.35 billion into the market for 3 days at 17.16%, and Rs776.85bn for 73 days at 17.16% respectively.
The overnight repo rate towards the close of the session was 16.5%/17%, whereas the 1-week rate was 16.95%/17.05%.
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Posted on: 2023-01-24T17:11:06+05:00