The US dollar breached another record on Thursday as it rose past Rs207 during early morning trade owing to concerns over depleting foreign exchange reserves and ambiguity regarding Pakistan's deal with the International Monetary Fund (IMF).
According to the Forex Association of Pakistan (FAP), the greenback was trading at Rs207.25, up 85 paisa at 12:20pm compared to the previous day's close of Rs206.46. On Wednesday, it had appreciated by Rs1.30.
In the open market, the dollar was trading at Rs208 today.
Asad Rizvi, former treasury head at Chase Manhattan Bank, outlined the rapid decline in the country's foreign exchange reserves as the main factor pressuring the rupee. "The urgency is to get the house in order per the IMF."
During the week ended June 3, liquid foreign exchange reserves of the State Bank of Pakistan declined by $497 million to $9.2 billion.
He highlighted that the government's measures of increasing the prices of petrol, electricity, and gas were not enough. "It will have to take more tightening measures in terms of abolishing subsidies, reducing the deficit, and imposition of additional taxes."
Rizvi further pointed out the need to resolve minor issues such as the 9 per cent tax to GDP ratio, 79 per cent GOP holdings, and 53 per cent advance deposit ratio so that the economy could get back on the track of stability.
On the other hand, Tresmark's research head Komal Mansoor said that the market would stay anxious until the IMF deal concluded. "That will also unlock other multilateral flows."
"It looks like the rupee may bottom out below the Rs210 level as many exporters are eager to look forward now,” she predicted.