Pak rupee plunges
to record-breaking
low against $ due to
political uncertainty


KARACHI: The Pakistani rupee continued the downward trend against the US dollar, plunging to a record-breaking low of 228.37 at the close of Friday’s trade.

During the intraday trading, the rupee fell to as low as 229, but it closed at 228.37, losing Rs1.56 or 0.68%, the data released by the State Bank of Pakistan (SBP) showed.

Political uncertainty arising out of the outcome of the Punjab by-elections, a downgrade of Pakistan’s ratings from stable to negative by Fitch Ratings, and a delay in the International Monetary Fund’s (IMF) programme are attributed by analysts as reasons for the continued battering that the rupee has taken.

Finance Minister Miftah Ismail, however, believes that the economy is on the right track and once political stability returns — which has been uncertain since the coalition government’s take over — the rupee will strengthen against the dollar.

Development economist Maha Rahman said that at this hour, foreign assistance from IMF and our long-term allies and its timeliness is more critical than ever before.

“The [rupee’s] depreciation this week, amongst other factors, has been triggered by the political surprise that the electorate delivered in Punjab on the weekend, and this frenzy should fizzle out soon,” she said.

But Pakistan, she said at this hour, needs active intervention as the overall outlook is fast becoming precarious with fast depleting liquidity.

“I usually also stress upon long-term planning but at this hour adept fire fighting is extremely critical,” Rahman stressed.

Shedding light on the situation, economist and former adviser to the federal ministry of finance Dr Khaqan Hassan Najeeb said that Pakistan follows a market-determined exchange rate system.

“In this regime, trade deficit and market influencing news make a lot of impact on currency changes,” the former adviser to the finance ministry said.

Miftah Ismail

Finance Minister Miftah Ismail on Thursday said the dollar market was now “under control”, and claimed that stability had returned following the government’s announcement that it intended to complete the remainder of its term.

Following the PTI’s thumping win over the PML-N in 15 of the 20 seats in Sunday’s crucial by-elections, speculation had started about what such a result would herald for the longevity of the federal government. However, the coalition government announced on Monday that it would still see off its term rather than calling for early elections.

ISLAMABAD: Federal Minister for Finance and Revenue Miftah Ismail and Federal Minister for Defence Khawaja Asif addressing a press conference in Islamabad on Thursday.

The political turmoil was not without its effects in the financial markets. Earlier today, the rupee’s slide against the dollar continued unabated with the local currency falling to Rs226 in the interbank market, with watchers attributing the losses to political “chaos” and a greenback that is strengthening against other currencies as well.

Addressing a press conference on the matter in Islamabad today alongside Defence Minister Khawaja Asif, Ismail said: “The dollar market has been quite shaken for two to three days since July 17 but it has now been brought under control slowly.”

The finance minister acknowledged that there was a “political turmoil” and negative sentiment in the market amid fears of the federal government being shaken, but added that things were now “stable since the coalition government said that it was not going [anywhere]”.

The finance minister said one of the reasons for increased pressure on the rupee was the bill for last month’s imports. However, he said imports for this month and the next would be lower due to measures taken by the State Bank of Pakistan (SBP), which would further reduce pressure on the rupee.

Ismail said there were ample fuel reserves for one to two months and fuel demand had seen a reduction as well, due to high prices, so pressure on the rupee would decrease.