KARACHI: The rupee suffered its seventh consecutive loss against the dollar, depreciating by Rs1.11 in the interbank market on Monday, despite claims of stability and high hopes with the IMF inflow.

Currency dealers said the local currency is now set to decline further without any resistance. The dollar settled at Rs287.92 in the interbank market while it gained Re1 to reach Rs293 in the open market.

During the last seven trading sessions the dollar appreciated by 3.98 per cent, or Rs11.46.

Currency experts said the dollarisation of the economy has started at a general level, as domestic savers are buying dollars to protect their savings. This is against the trend, considering that banks have been offering much higher returns due to the 22pc policy rate.

Depreciates by 4pc to Rs287.92 within a week

“It looks unreasonable that despite jumps in dollar inflows and agreement with the IMF, the market is not responding the way it was expected. However, the economy is not working, and the downward trend can be felt in almost all segments of the economy,” said Atif Ahmed, a currency dealer in the inter-bank market. He said the downward trend is shaking confidence and providing no support to the exchange rate.

For more than one and a half years, the serious shortage of dollars has been the main problem, pushing the country close to sovereign default. However, it narrowly escaped when the IMF agreed to provide a $3bn bailout.

Currency experts said that frequent negative reports about the country’s payment ability are another reason for the lack of market confidence. The country will have to pay about $25bn in debt servicing in FY24.

Senior bankers stated that the expected general elections in November this year are another reason for uncertainty. They said that political uncertainty is now more acute than economic uncertainty and is likely to further depress economic activities in the country.

“Allegations and counter-allegations by the political forces, along with doubts over fair and free elections, are sending the wrong message to the stakeholders of the economy,” said Amir Aziz, a manufacturer and exporter of textile finished products. Unless and until the situation clears after general elections, domestic and foreign investors will remain out of the economy, he added.

It is generally felt among the traders and industrialists that the poor economic growth like 2.5pc estimated by the IMF for FY24, would not help the exchange rate or the rupee to get stability. They said a strong base is required to support the rupee against the dollar.

Published in Dawn, July 25th, 2023