Dollar-rupee affair reflects North-South divide as local currency stays on a slippery slope

Dollar-rupee affair reflects North-South divide as local currency stays on a slippery slope


Country goes through the consequences of huge depreciation

LAHORE (Web Desk) – The Pakistani rupee had closed the calendar year 2022 at Rs226.58 against the US dollar in interbank trading but was available for Rs285.99 on Tuesday [27-06-23] – the last working day of the outgoing fiscal year amid an extended break due to the Eidul Azha holidays – translating into a Rs59.41 decline.

But this trend didn’t start since Jan 1, as the rupee is down Rs81.19 against the mighty dollar during the current financial year 2022-23. The interbank rate for the dollar was 204.84 on June 30, 2022.

This alarming trend is a product of the uncertainty caused by the stalled International Monetary Fund (IMF) programme, which may still be salvaged through the last-minute efforts made by Prime Minister Shehbaz Sharif.

On Tuesday, Shehbaz again contacted IMF Managing Director Kristalina Georgieva and expressed the hope that the world’s top lender would reach a decision on the stalled bailout package in a day or two.

“In connection with the meetings held in Paris, the IMF director general acknowledged efforts by the finance minister and his team for completion of the programme,” read a statement issued by the Prime Minister’s Office.

Later in the day, IMF Mission Chief to Pakistan Nathan Porter said talks were underway to reach an agreement with Pakistan on financial support from the global lender. The Pakistani authorities took decisive steps to bring policies more in line with the economic reform programme, he added.

Read more: IMF says talks underway with Pakistan to revive bailout package

Porter’s statement comes as Pakistan continues to negotiate with the IMF for the completion of a ninth review of the $6.5 billion Extended Fund Facility agreed in 2019 and the release of a $1.2bn tranche.

Debt repayments were the main cause behind the depreciation of the rupee. However, experts are of the view that 2023-24 too will be challenging because of being the election year and given that the bailout package is still in limbo. But the pressure on the rupee would reduce to some extent if Pakistan manages to complete the ongoing review.

Many analysts want a new IMF programme given that the current one expires in three days on June 30. But that would be another puzzle when and who will contact the world’s top lender – the present coalition arrangement, the next caretaker setup or the new government formed after general elections.

Adding spice to the mystery is the possibility that the elections might not be held on time due to the prevailing political environment and the economic crises we are facing.