Rupee suffers seventh straight loss against dollar
KARACHI: The rupee suffered its seventh consecutive loss against the dollar, depreciating by Rs1.11 in the interbank market on Monday, despite claims of stability and high hopes with the IMF inflow.
The local currency is expected to decline further without any resistance, according to currency dealers. Interbank dollar rates settled at Rs287.92, while open market rates gained Re1 to reach Rs293.
The dollar has appreciated by 3.98 percent, or Rs11.46, in the last seven trading sessions.
A general dollarization of the economy has begun, as domestic savers buy dollars to protect their savings. The 22pc policy rate has led banks to offer much higher returns, which is against the trend.
Despite increases in dollar inflows and an agreement with the IMF, the market does not appear to be responding as expected. Atif Ahmed, a currency dealer in the interbank market, said the economy is not working, and the downward trend can be felt across all economic segments. According to him, the downward trend is eroding confidence and providing no support to the exchange rate.
The shortage of dollars has been the main problem for more than a year and a half, pushing the country close to sovereign default. When the IMF agreed to provide a $3 billion bailout, it narrowly escaped.
Experts said frequent negative reports about the country’s payment ability also contributed to the lack of market confidence. As of FY24, the country will have to pay about $25 billion in debt servicing.
The upcoming general elections in November this year are another reason for uncertainty, according to senior bankers. Political uncertainty is now more acute than economic uncertainty, which will further depress economic activity.
According to Amir Aziz, a manufacturer and exporter of textile finished products, accusations and counter-allegations by political forces are sending the wrong message to stakeholders in the economy. He explained that domestic and foreign investors would remain out of the economy unless and until the situation cleared after general elections.
According to traders and industrialists, the poor economic growth of 2.5 percent estimated by the IMF for FY24 would not help stabilize the exchange rate or rupee. In order for the rupee to be supported against the dollar, a strong base is needed.