The US dollar closed at the startling milestone of Rs200 in the interbank on Thursday afternoon, gaining Re1.00 from the previous day's close of Rs199, data by the Forex Association of Pakistan (FAP) showed.
According to FAP data, the US currency reached the all-time high of Rs200.10 around 1:45pm in the interbank market before settling to Rs200 by close. It was trading at Rs201 in the open market at 3:50pm.
A day ago, the greenback had made a significant gain of more than Rs2 from Tuesday's close and settled at Rs199 at the session's end, which was the latest in a string of record highs that the US currency has been hitting since last Tuesday.
While the FAP recorded the previous day's closing rate at Rs199, data released by the State Bank of Pakistan stated the closing rate as Rs198.39 — still remarkably close to the Rs200 milestone that the international currency was being anticipated to reach earlier in the day on account of the country's rising import bill, growing current account deficit and depleting foreign exchange reserves.
The dollar's value already reached Rs200 in the open market yesterday.
According to Saad Bin Naseer, co-founder and director of web-based financial data and analytics portal Mettis Global, the rupee's fall is mainly on account of a lack of clarity from the government on its plans to arrest the decline in foreign exchange reserves.
He pointed out that the central bank's reserves were down by $7.5bn since January 1, adding that importers were engaged in panic buying as they were uncertain about whether the government would be able to secure funding from China, Saudi Arabia and the International Monetary Fund, talks with which are underway.
"Meanwhile, exporters are holding their earnings outside the country amid a consistent fall in the rupee's value," he said.
The milestone has left some experts distraught.
Speaking about today's exchange rate, FAP secretary general Zafar Paracha told Dawn.com that today was the "blackest day" in the history of Pakistan.
For his part, FAP chairperson Malik Bostan, in a comment to Dawn.com, urged the Federal Board of Revenue (FBR) to issue statutory regulatory orders for the implementation of decisions taken to restrict imports.
Importer and former president of Karachi Chamber of Commerce and Industry Abdullah Zaki told Dawn.com importers were facing the biggest loss due to the rise in the dollar's value.
He added that the country's import bill had increased by 20 per cent in the past month and this would affect the prices of edibles, such as lentils, powder milk and tea.
Zaki recommended that the SBP may fix the rate of dollar in the interbank market for a certain period to curtail the impending inflation. He also demanded that no duties be increased on edibles.
Meanwhile, Asad Rizvi, the former treasury head at Chase Manhattan, told Mettis Global that "pension cost, circular debt [of] Rs2.5 trillion, public entities [worth] Rs1.2tr and fiscal deficit of nearly 8pc are not sustainable and adding pressure" on the rupee."
The "independent SBP", meanwhile, was "not worried about the PKR plunge, probably waiting for [an] IMF outcome," the Mettis Global report quoted him as saying.
In recent weeks, rising oil prices have already doubled the country's oil import bills and the overall imports are also at a record high. In April, imports increased by 72pc, leaving no room for the government to improve its external balance.
Moreover, foreign exchange reserves of the central bank have touched $10.3bn, lowest since June 2020.
Currency dealers say the unexpectedly high imports bill and low foreign investment were not in support of the exchange rate while over $13bn current account deficit was already there as a challenge for the government.
Talks under way for IMF bailout
The development comes as Pakistani officials resumed negotiations with the IMF yesterday, in which Finance Minister Miftah Ismail sought to clear uncertainty on two counts — that the new coalition government would stay in office and take tough decisions, undertake reforms committed in the original fund programme and complete structural benchmarks.
Informed sources said the talks opened on a healthy note as the two sides appeared converging to key principles — separating the state’s economic decision-making from politics.
These sources said the government would be revising fuel and energy prices within days and impose a complete ban, instead of increasing duties, on a total of about 30 luxury items major among them vehicles and mobile phones besides some other no-so-big items to contain imports and thus external account. These announcements would be made shortly to progress talks towards the successful completion of the revised programme.