KARACHI: The rupee partly recovered for the second successive day in the open market as it regained up to Rs2 and stood at Rs133 against the US dollar after Beijing welcomed Saudi Arabia as a new partner in the multibillion-dollar China-Pakistan Economic Corridor (CPEC).
With this rebound, the Pakistani currency has bounced back 5% in the last two days from Rs140 on Tuesday. The currency in the inter-bank market, however, inched down Rs0.16 in the last two days to Rs133.80 against the greenback compared to Rs133.64 on Tuesday, according to the State Bank of Pakistan (SBP).
Earlier, the rupee faced the largest drop of 7.5% in a day to a historic low at Rs133.64 to the US dollar on Tuesday following the government’s announcement that it was going for an International Monetary Fund (IMF) bailout to avoid default on import payments and debt repayments.
With this fifth round of massive currency depreciation, the rupee has cumulatively lost around 27% since December 2017.
“Saudi Arabia’s joining of the multibillion-dollar CPEC project means Pakistan is set to receive what it expected in foreign direct investment from the friendly country at this point in time when the country is in dire need of dollars to tackle a balance of payments crisis,” said Pakistan Forex Association President Malik Bostan.
Pakistan’s foreign currency reserves dropped another $100 million to a critically low level of one and a half month of import cover at $8.3 billion by October 5, according to the SBP.
Besides, the law enforcement agencies’ crackdown on foreign currency smugglers and increased sale of dollars by people who had earlier held them back awaiting further weakness in the rupee’s value also helped ease pressure on the rupee, currency dealers said.
Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha, however, demanded that the government investigate the sharp volatility in the rupee’s value in the inter-bank market.
“When the authorities exactly know as to what extent the rupee should depreciate for an IMF programme, then why the currency has remained volatile,” he asked.
“Banks are the direct beneficiary of the volatility in the inter-bank market,” he claimed.
Published in The Express Tribune, October 12th, 2018.