KARACHI: The rupee touched another all-time low on Thursday and the central bank’s reserves fell close to a precariously low level of $3 billion as the country continues to reel from economic and political turmoil.

According to State Bank of Pakistan (SBP) data, its reserves dropped 16 per cent to $3.09bn — barely enough to cover less than three weeks of imports — in the week ending Jan 27 due to external debt repayments.

The reserves are at their lowest since February 2014 and can only cover 18 days’ worth of imports, the lowest the import cover has been since 1998, according to local investment firm Arif Habib Ltd (AHL). Reserves held by commercial banks stood at $5.65bn, taking the country’s total liquid reserves to $8.74bn, the SBP said.

“The country is in dire need of fresh inflows and the resumption of the IMF programme as soon as possible to avoid the crisis,” Reuters quoted Tahir Abbas, head of research at AHL said, as saying.

Rupee hits record low of 271.36 against dollar

Pakistan is locked in negotiations with the International Monetary Fund (IMF) to release much-needed money under a stalled bailout programme. A successful outcome with the IMF would also help to release money from other platforms that are looking for a green light from the lender.

The government on Tuesday held talks with the IMF to unlock funds from a $7bn bailout designed to ward off an economic meltdown. The talks, to continue through Feb 9, are meant to clear the IMF’s 9th review of its Extended Fund Facility, aimed at helping countries with balance-of-payments crises.

The lender had set several conditions for resuming the bailout, including a market-determined exchange rate for the local currency and an easing of fuel subsidies. The central bank recently removed a cap on exchange rates and the government raised fuel prices by 16pc.

Meanwhile, the rupee lost 0.93pc in the interbank market on Thursday, closing at a new historic low of 271.36 against the dollar, according to the SBP. The open market offered the dollar at Rs275.50 compared to Rs275 a day before.

Currency experts said that despite a free-floating exchange rate, the situation was still uncertain and exporters and others were reluctant to sell their dollars in the market.

Bankers said inflows of export proceeds had started but at a slow pace. “If the inflows rise during January, it means the uncapping of the exchange rate started influencing the market in the right direction. I believe that both the export proceeds and remittances will rise in January,” said Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan.

Other currency dealers also attached the exchange rate stability with successful talks with the IMF.

Reports appeared in the media suggest that in order to generate dollars, the government has offered stakes in profitable companies, including the Oil and Gas Development Companies and Pakistan Petroleum, to the United Arab Emirates.

Published in Dawn, February 3rd, 2023