KARACHI: On Wednesday, the Pakistani rupee dipped by Rs0.08, reaching a two-week low of Rs278.26 against the US dollar in the inter-bank market. This drop is largely due to speculation that the government may allow further depreciation of the rupee to secure the next International Monetary Fund (IMF) loan by July 2024.
According to data from the State Bank of Pakistan (SBP), the rupee had closed at Rs278.18 against the dollar on Tuesday.
There is market speculation that the currency could see significant depreciation to meet IMF conditions for a new loan package. Additionally, the IMF has urged the government to liberalize imports of raw materials to boost economic activities, which would increase demand for the dollar.
Pakistan has started discussions with the IMF to secure a larger loan program of around $6-8 billion over three to four years.
However, some experts disagree with the notion of further rupee devaluation, arguing that the local currency still has potential for appreciation. Former state minister Ashfaq Tola recently estimated the rupee’s fair value at Rs235/$ during a TV talk show.
Over the past eight months, the rupee has appreciated by 10.36%, or Rs28.84, from its record low of Rs307.10/$ in early September 2023. Meanwhile, the Exchange Companies Association of Pakistan (ECAP) reported a slight increase of Rs0.05 in the open market, with the rupee closing at Rs279.45/$.
The difference between the rupee’s value in the inter-bank and open markets was Rs1.19 (or 0.43%), which is well below the IMF’s recommended ceiling of 1.25% (approximately Rs3.50 at current levels).
Gold Prices Rise
Gold prices in the local market surged to a nearly three-week high of Rs244,000 per tola (11.66 grams) on Wednesday, increasing by Rs2,900 in line with global trends. This rise follows a recent decline of Rs2,700 over the past three working days.
The increase came as the price of gold rose by $28 to $2,365 per ounce (31.10 grams) in the international market, according to the All Pakistan Saraf Gems and Jewellers Association.
