Aamir Qureshi—AFP
The U.S. dollar on Thursday shattered records by hitting Rs. 200 during interbank trading, a rise of Rs. 1 from the previous day’s close. This is the highest value the U.S. dollar has ever posted against the Pakistani rupee.
The greenback has seen continuous gains against the local currency in the past week, going from Rs. 190/dollar to 200 today. On May 10, the currency was trading at Rs. 188.66; this declined to Rs. 190.02 on May 11; followed by Rs. 191 on May 12; Rs. 192.52 on May 13; Rs. 194 on May 16; Rs. 195.74 on May 17; and finally, Rs. 198.39 on May 18.
Observers have said this is linked to the country’s rising import bill and growing current account deficit, as well as its rapidly depleting foreign exchange reserves. The situation has been exacerbated by uncertainty over the International Monetary Fund (IMF)’s suspended bailout program for Pakistan, which the incumbent government has been attempting to revive.
Reportedly, several “friendly” nations have pledged to help shore up Pakistan’s foreign exchange reserves—but only once the next $1 billion tranche of the IMF’s Extended Fund Facility has been released. Negotiations between the incumbent government and the IMF are currently underway in Doha to revive the suspended bailout program. A key stumbling block appears to be the IMF’s demands for the incumbent government to reverse a fuel subsidy announced by the ousted Pakistan Tehreek-e-Insaf (PTI)-led government. The current coalition government has claimed that it does not wish to pass on the burden of the unsubsidized prices to the consumer, but has admitted that continuing it is unsustainable.
As part of measures to arrest the decline in foreign exchange reserves, the government has decided to impose a ban on imports of non-essential “luxury” items. P.M. Shehbaz Sharif has also taken notice of the continuous depreciation of the rupee against the U.S. dollar, with the government announcing that he would convene an “important” meeting today (Thursday) to review the economic situation and consider measures to reduce the ongoing devaluation. Experts have stressed that immediate decisions are necessary to overcome the prevailing crisis, warning that meetings and drawn out considerations are causing significant harm to the economy.