Rupee weakens against dollar, just shy of record low

KARACHIThe Pakistani currency weakened to Rs133.84 to the US dollar, close to the historic low hit in mid-October, in the inter-bank market on Friday after Islamabad started talks with the International Monetary Fund (IMF) for a bailout package.The rupee lost Rs0.82, or 0.61%, from Thursday’s close of Rs133.02, the State Bank of Pakistan (SBP) reported.During the day, the rupee hit an intra-day low of Rs134.04 to the greenback as Pakistan’s foreign currency reserves dropped to a four-and-a-half-year low at $7.67 billion on November 2, 2018, which were insufficient for one and a half month of imports.

Rupee weakens against dollar

Besides, “Pakistan has to repay $9 billion in (external) debt by June 30, 2019,” said Pakistan Forex Association (PFA) President Malik Bostan while talking to The Express Tribune.Last month, Saudi Arabia agreed on an assistance package of $6 billion for Pakistan, including $3 billion in cash and another $3 billion in credit for petroleum oil imports.

Any delay in the receipt of these funds may impact day-to-day currency market movements.

“The rupee may fall further if the IMF imposes stringent conditions for the bailout …and the expected flow of funds from friendly countries is delayed,” said Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha. “Otherwise, the rupee will recover.”Last week, Prime Minister Imran Khan flew to China for a five-day visit and upon return, he claimed that Beijing had pledged financial assistance but it did not want to disclose the amount.Besides, in case of successful negotiations, first installment of an IMF loan is expected to be received by the middle of December 2018.Finance Minister Asad Umar has claimed that Pakistan has all the arrangements in place to pay for imports and bear debt servicing cost till February 2019 if the IMF package is delayed.He declared the other day that if the IMF imposed conditions that were not acceptable to Pakistan, the country would opt out of the bailout.

The chances for this, however, remain low.

On October 16, 2018, the rupee hit a historic low, closing at Rs133.85 to the US dollar, just one paisa above Friday’s closing level.The rupee has lost Rs1.81, or 1.37%, since it recovered to Rs132.03 on October 24, 2018.

Rupee stable against dollar

The rupee in the unregulated open market closed trading at Rs134 to the greenback on Friday, currency dealers said.

“The open market has continued to trade below the inter-bank rate due to little demand for foreign currency,” Paracha said. “Demand in the inter-bank market comes apparently due to import payment and debt repayment pressure as the country’s foreign currency reserves have dropped to critically low levels.”Bostan added that open market’s currency dealers had continued to sell dollars in the inter-bank market as demand for the foreign currency from individuals had remained low for quite a long time.

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