Pakistani rupee tumbles to all-time low against US dollar amid IMF condition

KARACHI, Pakistan

The Pakistani rupee tumbled to an all-time low on Thursday against the US dollar days after a cash-strapped Islamabad agreed to accept a key International Monetary Fund (IMF) demand for the removal of an unofficial cap on the exchange rate.

The value of the dollar shot up by 24.25 Pakistani rupees – a historical high of 255 rupees – in the interbank market, according to the foreign exchange dealers.

With an increase of 19 rupees in the open market, the greenback was traded at 262 rupees, bridging a longtime gap between interbank and open market exchange rates.

Thursday's devaluation, which surpassed the previous all-time high of 240 rupees in July last, comes at the heels of Prime Minister Shehbaz Sharif's announcement last week that Islamabad is ready to accept "all IMF demands" to win the long-stalled $1.8 billion tranche of a $6 billion bailout package.

The latest devaluation is seen as a result of a key IMF condition for Pakistan to institute a market-determined exchange rate without any government interference.

Depreciating foreign reserves and a staggering $60 billion import bill had left the central bank – the State Bank of Pakistan (SBP) – with no option but to lift a de-facto cap that artificially controlled the rate, said Malik Bostan, the head of Pakistan Forex Dealers Association.

Pakistan's current foreign reserves stand at around $10 billion, of which slightly over $4 billion are possessed by the State Bank of Pakistan.

Thursday’s drop marks the 14th consecutive devaluation of the currency – one of the worst in Asia – since December 2017.

It coincides with a gradual increase in gas, petrol, and electricity prices – another major condition reportedly demanded by the IMF in exchange for the release of the stalled tranche.

The SBP, this week, also raised interest rates to a 24-year high to fight surging prices.

The rupee’s official value has depreciated 11.23% against the dollar since the start of the 2022-23 fiscal year, which ends on June 30.

In 2019, Pakistan sealed a $6 billion bailout package with the IMF to prop up the country’s slowing economy.