KARACHI: The rupee sank further against the dollar on Wednesday, losing over 1% as the unofficial restriction on the greenback was lifted. The rupee finished at 243 versus the dollar, down 2.25 percent, according to the Exchange Companies Association of Pakistan (ECPA), compared to a range of 237.75-240 at the close on Tuesday. According to the State Bank of Pakistan (SBP), the greenback finished at 230.89 on the interbank market, down 0.58 percent from Tuesday's closing of 230.40. The shift toward a market-based currency rate should delight the International Monetary Fund (IMF), as it is one of the requirements the global lender imposed before agreeing to restart Pakistan's delayed bailout program. Finance Minister Ishaq Dar's efforts to safeguard the rupee, including currency market intervention, went against IMF guidance. The central bank has hiked interest rates dramatically in response to the country's greatest inflation in decades, yet the government only has enough foreign exchange reserves to cover three weeks of imports and is struggling to satisfy its external funding obligations. The ECAP said late Tuesday that it was removing the currency ceiling in the country's interest. Prior to the removal of the rupee cap, markets looked at three separate rates to determine its value: the official rate set by the state bank, the rate set by foreign exchange businesses, and the black market rate. According to ECAP President Malik Bostan, the central bank assured commercial banks at a conference that they would be ordered to furnish exchange businesses with dollars within a week. "There is a scarcity. We don't have actual dollars "Bostan said. "Nobody is selling money. They are solely interested in purchasing." He stated that lifting the cap would reduce black market transactions, but that it would take time to close the deficit. "The black market pricing is still stuck in the 260-270 area. The decision of exchange firms has had no effect "Fahad Rauf, head of research at Ismail Iqbal Securities, agreed.
KARACHI: The rupee sank further against the dollar on Wednesday, losing over 1% as the unofficial restriction on the greenback was lifted.
The rupee finished at 243 versus the dollar, down 2.25 percent, according to the Exchange Companies Association of Pakistan (ECPA), compared to a range of 237.75-240 at the close on Tuesday.
According to the State Bank of Pakistan (SBP), the greenback finished at 230.89 on the interbank market, down 0.58 percent from Tuesday’s closing of 230.40.
The shift toward a market-based currency rate should delight the International Monetary Fund (IMF), as it is one of the requirements the global lender imposed before agreeing to restart Pakistan’s delayed bailout program.
Finance Minister Ishaq Dar’s efforts to safeguard the rupee, including currency market intervention, went against IMF guidance.
The central bank has hiked interest rates dramatically in response to the country’s greatest inflation in decades, yet the government only has enough foreign exchange reserves to cover three weeks of imports and is struggling to satisfy its external funding obligations.
The ECAP said late Tuesday that it was removing the currency ceiling in the country’s interest.
Prior to the removal of the rupee cap, markets looked at three separate rates to determine its value: the official rate set by the state bank, the rate set by foreign exchange businesses, and the black market rate.
According to ECAP President Malik Bostan, the central bank assured commercial banks at a conference that they would be ordered to furnish exchange businesses with dollars within a week.
“There is a scarcity. We don’t have actual dollars “Bostan said. “Nobody is selling money. They are solely interested in purchasing.”
He stated that lifting the cap would reduce black market transactions, but that it would take time to close the deficit.
“The black market pricing is still stuck in the 260-270 area. The decision of exchange firms has had no effect “Fahad Rauf, head of research at Ismail Iqbal Securities, agreed.
