Pakistan’s rupee has witnessed yet another round of depreciation on Monday, July 16, 2018, and is trading at around 127/127.5 per USD in the interbank market at the time of the writing of this article, the lowest that it has plunged against the dollar to date.
This is the third round of depreciation this year, after the currency devalued in March and June earlier this year, and the fourth round since the December 2017 devaluation.
It remains to be seen where the PKR would eventually settle by the end of the day and over the next few days.
Only one month ago, on June 11, 2018, PKR had jumped from around 115/USD to about 120/USD, which makes this devaluation particularly concerning. The intervention comes about only a day after the State Bank revised the interest rate on Saturday, July 14, 2018, increasing it by a 100 basis points to 7.5%.
The devaluation is going to have a positive impact on exporters such as textile and IT companies for instance, and will work towards curtailing imports; something that State bank needs urgently to curtail our rising current account deficits that hit a record high of $37.7 billion according to data released from the Pakistan Bureau of Statistics days ago.
Analysts continue to hold the opinion that rupee is going to slide even further and that the government may have to resort to the IMF for a bailout package to prevent that from happening.
“We now expect PKR to continue to devalue till PKR 128/USD by the end of the year or till a new IMF program is approved,” says Shumaila Badar, Head of Research at Ismail Iqbal Securities.
The caretaker finance minister, Shamshad Akhtar, on Saturday July 14 2018, had met a group of senior brokers and members of mutual funds at the Pakistan Stock Exchange, informing them that the caretaker government has been preparing spadework for entering into a new program with the International Monetary Fund. However, she let the burden of that eventual decision fall to the incoming government after the upcoming elections on July 25, 2018.
Dollar in the open market has jumped up by almost Rs 4 to Rs 128.50/USD.
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