Neither the government nor the IMF has said anything about the need for any further depreciation of the currency, though Pakistan recently adopted a market-based exchange rate under advice from the lender under the economic reforms agenda. Paracha said he did not see any reason for the depreciation in the rupee other than possible IMF pre-conditions.
“There is panic in the market, I fear it will go down further,” Zafar Paracha, secretary-general of the Exchange Companies of Pakistan, a foreign exchange association, told Reuters earlier on Wednesday. The panic in the South Asian market also comes from escalating risks after former premier Imran Khan’s by-election win added to concern over the country’s bailout deal with the IMF, which it needs to avoid a default. On Wednesday morning, the rupee was trading at 225 per dollar, having ended Tuesday at 221.99 after Fitch Ratings revised its outlook for Pakistan’s sovereign debt from stable to negative – though it affirmed the Long-Term Foreign-Currency (LTFC) and Issuer Default Rating (IDR) at “B-“.Įmerging-market currencies are feeling the heat as the hawkish Federal Reserve lures capital towards the United States. The rupee fell 2 percent on Monday, and 3 percent on Tuesday, despite last week’s staff level agreement reached with the International Monetary Fund (IMF) that would pave the way for a disbursement of $1.17bn under resumed payments of a bailout package. “The panic is primarily due to political turmoil, which will subside in a few days.” “The rupee downturn is not due to economic fundamentals,” Miftah Ismail told the Reuters news agency on Wednesday.
Pakistan’s finance minister has blamed the rupee’s slide on political turmoil, saying he expects market jitters over the currency’s sharp decline to subside soon.