KARACHI: The US dollar rose to an all-time high with a record single-day appreciation in the interbank market to reach Rs215.20, on the back of fears that the IMF and other sources of foreign exchange would dry up with a change in the political scenario after PTI’s win in the Punjab by-polls.

The State Bank of Pakistan (SBP) reported that the dollar increased by Rs4.25 against the July 15 closing price of Rs210.95.

In the first session, the greenback shot up to Rs217 but gradually came down to the level reported by the SBP. However, the exchange companies reported it was closed at Rs216.20.

“The country is paying a heavy cost of the political uncertainties looming large over Pakistan for more than six months,” said Atif Ahmed, a currency dealer in the interbank market.

He said the hopes for inflows from IMF and other sources, as assured by Finance Minister Miftah Ismail, have vanished.

“The reality is that the SBP’s foreign exchange reserves have been declining each day, the inflows are out of sight while imports are still on the higher side,” said the currency dealer.

The dollar was at its peak on June 22 as it rose to Rs211.93 and fell to to Rs207.23 on June 23, posting a record depreciation of Rs4.70 in a single session.

The massive fluctuations in the exchange rate reflect the magnitude of changing political scenario. Despite record inflows of remittances and export proceeds, the trade deficit for FY22 was over $48bn which further pushed the current account deficit to a dangerous level.

After PTI’s surprise win in Punjab by-polls on Sunday, many political parties have started demanding fresh general elections.

The news of reaching a staff level agreement with the IMF didn’t boost market sentiments as the local currency continued its downward trajectory. The US dollar kept its complete domination during the entire fiscal year FY22 and FY23 is also facing the same situation.

With the declining foreign exchange reserves, the State Bank’s payment capacity has become questionable in the financial sector, resulting in declining confidence of the market in the country’s capacity to meet its external obligations mainly the debt repayments.

In the open market, the dollar was traded at Rs216 against Rs211 in the previous session.

Published in Dawn, July 19th, 2022

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