By Staff Reporter
KARACHI: The rupee hit a new record low against the US dollar in Wednesday trade as the relentless surge in global crude oil prices raised concerns about a sustained rise in imported inflation, while a shortage of dollars threatens to spiral into a full blown crisis.
The was trading at 207 per dollar at the interbank market. At the open market rupee is quoted at 208 verse the US dollar.
Traders said the rupee could eventually weaken towards 210/dollar levels by end of fiscal year 2022/23 but the fall could be accelerated by firm crude oil prices and alarmingly low foreign currency reserves.
Pakistan imports over 90 percent of its oil requirements and high crude tends to push up domestic inflation while also widening the country’s trade and current account deficits.
“There is uncertainty on the revival of the IMF programme after the Fund needs additional measures to bring the budget in line with its key programme condition,” a dealer said. “Global oil prices are trading above $120 per barrel and furthermore, there is a global economic slowdown which is being reflected locally as well.”
The IMF had asked Pakistan to address its elevated fiscal and current account deficits before releasing a bailout package, as Pakistan had deviated from policies agreed in the last review under the multilateral agency’s Extended Fund Facility programme.
It is unclear when the IMF would clear the release of over $900 million under its $6 billion, 39-month programme.
The IMF is still concerned about fuel subsidies, a widening current account deficit, and the need to raise more direct taxes. Fuel subsides have been cut in the last two weeks, and the remaining support is expected to be removed in coming days.
The proposed budget estimates also seek to rein in the current account deficit, but direct tax revenues remain a concern and officials said “slight differences” remain there.
Copyright © 2021 Independent Pakistan | All rights reserved
