The Pakistani rupee gained 1.84 against the US dollar during early interbank trade on Tuesday, marking the eighth consecutive session that it has recovered.
The local currency was changing hands at Rs225.45 per dollar at 9:42 am, according to the Forex Association of Pakistan (FAP). This equates to an appreciation of 0.81 per cent from yesterday’s close of Rs227.29.
The rupee recovered Rs12.42 or 5.35pc against the greenback in the last seven sessions.
FAP Chairman Malik Bostan said the dollar’s value had been “artificially increased” and was now declining because of the government’s strict monitoring. He expected the rupee to further appreciate in the interbank market in the coming days.
Bostan also noted that inflation had eased to 23.18pc in September from a 49-year high in the preceding month. As a result, the central bank was expected to either maintain or reduce the interest rate instead of tightening monetary policy, which could strengthen the rupee, he elaborated.
The market also expected that the International Monetary Fund (IMF) would ease conditions under the ongoing programme in view of the devastating floods, which would help strengthen the rupee, the FAP chairperson said.
A day earlier, Finance Minister Ishaq Dar said that the rupee was undervalued and it should be below Rs200 against the dollar.
“The actual value of the Pakistani rupee is less than Rs200 against the US dollar and it will be brought down as it is currently undervalued.”
However, currency experts fear that any artificial exchange rate will ultimately hurt the economy as was witnessed when the same finance minister during his tenure up to 2018 brought down the rupee below Rs100. The cheaper dollar encouraged imports which resulted in a huge trade gap and his government ended with an unprecedented $20bn current account deficit.
Alpha Beta Core CEO Khurram Schehzad cautioned Dawn that the minister “should not talk about setting currency parity, or at least not openly” as it was the State Bank of Pakistan’s prerogative and the government had committed to the IMF that the finance ministry would not interfere in the central bank’s matters.
Instead, the government should hold the SBP accountable for “achieving a realistic currency parity (in line with fundamentals) as well as taming inflation (demand side), while managing supply side disruptions via a thorough strategy (farm to market management with necessary imports in time)”, he commented.