Pakistani rupee (PKR) continued its downturn trend for the third consecutive day as it touched a two-week low of Rs172.93 against the greenback during trading in the inter-bank market on Wednesday.

The rupee depreciation comes amidst uncertainty revolving around the revival of the International Monetary Fund (IMF) loan program.

According to data from the State Bank of Pakistan (SBP), the rupee has lost a total of 1.74% (or Rs2.96) against the US dollar after the latest shedding of 0.75% (or Rs1.3) on Wednesday in comparison to the five-week high value of Rs169.97 reported on November 3.

Head of Research at Arif Habib Limited (AHL) Tahir Abbas said, “The uncertainty related to the revival of IMF’s $6 billion loan program is once again mounting pressure on the rupee.”

The depreciation of the local currency contributed significantly to boosting the gold price by Rs1,000 as it touched a two-week high at Rs125,800 per tola (11.66 grams).

All Sindh Saraf and Jewellers Association (ASSJA) member Abdullah Abdul Razzaq Chand Abbas said that the reason behind the partial recovery of the rupee to Rs169.9 on November 3 from the record low of Rs175.27 hit on October 26 was the expectation that the government will be able to reach an agreement with the IMF regarding the revival of the loan program.

However, the uncertainty resurfaced as reports circulated suggesting that the country will quit the program altogether as the IMF continues to keep the tough conditions regarding the bailout.

He added, “This situation took a severe toll on the rupee. The local currency should recover some ground against the greenback to Rs169-170, once Pakistan and the IMF announce the resumption of the program”.

As per reports, Pakistan has satisfied all the conditions imposed by the IMF including the raising of the power tariff. The parties need to reach an agreement pertaining to the autonomy of the State Bank of Pakistan (SBP).

The government has communicated to the IMF that it lacked two-thirds majority in the parliament which was needed for the approval of the SBP Amendment Bill 2021. According to reports, IMF is expected to consider the government’s position.

Abbas forecasts the demand for the dollar to fall amid a likely decrease in import bill as the SBP and the government has introduced steps to curtail it. Regulatory duty has been imposed on the import of non-essential and luxury items. Abbas added, “The measures would soon result in stability of rupee”.

He added that the country’s current account deficit is estimated to drop to $700-800 million during October in comparison to $1.2 billion recorded in the month of September 2021. “The likely improvement in the current account deficit would also help rupee recover some ground against the greenback.”

The price of gold has continued to rise in Pakistan mostly owing to a downtrend in the rupee against the greenback, as Pakistan fulfills local demand for the metal through imports.

As per All Sindh Saraf and Jewellers Association (ASSJA), the gold price has soared by Rs5,600 per tola in the last five days to a two-week high at Rs125,800.

ASSJA member Chand said, that the price of gold jumped in the international markets after “the US reported 30-year high inflation at 6.2% on Wednesday”.

Global investors have purchased gold as a hedge against the devaluation of their respective local currencies in times of rising inflation. Subsequently, the US historic high inflation drove gold to $1,868 per ounce (31.10 grams) during the intra-day trading at the London market on Wednesday in comparison to the opening value of $1,825 he added. “The gold price should be around Rs128,200 per tola in Pakistan considering the fact that it hit an intra-day high of $1,868 per ounce in the global market.”


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