KARACHI: The rupee continued its downward spiral on Tuesday, falling to a record low of Rs 299.01 per US dollar because of rising imports and an attempt to decrease the difference between rates in the interbank and open markets.
State Bank of Pakistan (SBP) data showed the rupee lost Rs 1.88 or 0.63 percent against the dollar to fall to a fresh low. Previously, the rupee’s record low was Rs 298.93 which was reached on May 11 amid political and economic turmoil.
Meanwhile, the rupee was traded at Rs 306 in the open market, according to the Exchange Companies Association of Pakistan. This equates to a difference of Rs 6.99 or 2.34 percent. This difference is one of the reasons the rupee’s value is declining as under the standby agreement signed with the International Monetary Fund (IMF), the premium between the interbank and open market cannot be more than 1.25 percent.
Thus, the rupee is falling in the interbank market as the gap is narrowed, according to Sana Tawfik, a senior analyst at Arif Habib Limited.
Another important reason the rupee fell is that the government recently lifted import restrictions, which had been in place since last year as the country’s foreign exchange reserves depleted to a critical level.
Tawfik pointed out that current account deficit figures released by the SBP last week showed a nearly 30 percent month-on-month rise in imports in July.
The analyst said the rupee might be granted a breather once the inflows projected by the SBP materialised. Otherwise, it would remain range-bound and continue to be traded at the current level in the short term.
