ISLAMABAD, May 12 (Xinhua) -- Devaluation of the Pakistani rupee against the U.S. dollar continued as the greenback touched a historic high of 190.02 rupees in interbank trading on Wednesday, according to the latest figures from the State Bank of Pakistan (SBP).
The U.S. dollar closed at 188.66 rupees on Tuesday and opened higher on Wednesday after the local currency devalued by 1.36 rupees, or about 0.72 percent, the official figure showed.
The Pakistani rupee has depreciated against the greenback since May last year when it started surging from 152.27 rupees.
Local analysts believed that multiple factors including the government's failure to secure a bailout package from the International Monetary Fund (IMF), subsidy on fuel, surging imports, and falling exports are the main causes of the nosedive of the local currency against the U.S. dollar.
In a conversation with Xinhua, Sajid Ameen Javed, a renowned economist and deputy executive director at an Islamabad-based think-tank Sustainable Development Policy Institute, said that uncertainty regarding the IMF program is the major reason for panic in the market and pressure on the Pakistani currency.
According to the SBP, its reserves declined 59 million U.S. dollars to 10.5 billion dollars at the end of last month. The country is also facing a serious challenge in its foreign exchange reserves, which fell by 115 million dollars at the end of April, due to surging external debt payments and a higher current account deficit, official figures from the central bank showed.
Citing the bank's figures, Javed said that an urgent bailout package from the foreign donor is very important to provide a cushion to the economy and boost the confidence of investors and exporters.
He said that the demand for the U.S. dollar has also increased in the market after Eid holidays due to pending payments of imports to the international markets.
"The hesitation of the recently elected collation government to take bold decisions including removal of fuel subsidy accounting for 150 billion Pakistani rupees a month, which is a major deadlock between the finance ministry and the IMF, is also contributing to pressure on the local currency," he added.
The stock market is also in a worse condition and has lost 641 points on Wednesday, two days after losing 1,447.67 points during trading, he said, adding that the market has sent shockwaves to the currency market, putting pressure on the rupee.
The increase in the greenback's price has also triggered a new wave of inflation in the country with prices of all commodities ranging from food to other necessities increasing.
According to a recently available report of the Pakistan Bureau of Statistics released on May 2, inflation in the country, measured by the Consumer Price Index, was recorded as 13.37 percent in April, the highest in two years.
Latest comments