The rupee remained under pressure and slid further against the US dollar in the open market on Tuesday, trading above Rs320 to the greenback.

According to the Forex Association of Pakistan (FAP), the rupee had depreciated to Rs323 in the open market against the dollar, while remaining under pressure in the interbank market, where it lost 70 paise more to the greenback. It was being traded at Rs302.70 by afternoon.

However, by close, it had returned to Rs302 to the dollar, according to State Bank of Pakistan data.

Khurram Schehzad, CEO of Alpha Beta Core, advised that the open markets need to be governed better to check for any speculative activities that have led the dollar to go up much more than it warranted.

Rupee devaluation and IMF

The increasing difference between the interbank and open market rates of the dollar has thrown up a challenge for the government as the Standby Arrangement (SBA) with the International Monetary Fund (IMF) requires it to keep the differential down to 1.25 per cent.

A key condition of the $3bn SBA, signed last month, relates to the market-determined exchange rate.

“Steadfast policy implementation is vital for Pakistan to overcome its current challenges through greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms,” said the IMF as the agreement was reached.

The rupee has been steadily weakening after the IMF deal, shooting up to Rs302 in the interbank market.

Although the interbank dollar rate is considered close to the official price, the open market rates being released by exchange companies are far from real, and the open market is heading fast towards the grey market area — which has attracted millions of dollars in the shape of remittances and export proceeds — highlighted a Dawn report today.

Analysts believe the current situation represents an uphill task for the government to convince the IMF that the country deserves the next tranche of SBA.

They said the IMF would scrutinise the entire economy and the performance in key macro indicators.

Meanwhile, Atif Ahmed, a currency dealer in the interbank market, said “the IMF is expected to review the SBA in November. There are still two months to go, but there is little likelihood that the State Bank would be able to bring down the differential to 1.25pc”.