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Shahid Iqbal
July 22, 2023
KARACHI: The rupee depreciated for the sixth day on Friday, falling by 0.58 per cent to
Rs. 286.81 against the US dollar on the interbank market, central bank data showed.
According to the State Bank data, the rupee depreciated by Rs10.35 in six sessions, shedding all the gains it had made after a short-term, $3 billion agreement with the IMF.
On June 27, the rupee closed at 285.99 in the interbank market on the last trading day before Eidul Azha, before rising by 3.83pc to 275.44 in the next session on July 4.
The rupee has lost value even though State Bank’s reserves have jumped to $8.7bn, close to the reserves in October 2022.
Currency experts said that the latest rupee depreciation over the past few days was a sign of a lack of confidence in the local currency and the economy on the whole.
Analysts said stringent IMF conditions had created doubts that the country could abide by the tough requirements. At the same time, uncertainty over the political horizon is still there and may continue until a new government takes the helm, they said. However, bankers believe that chances for growth in exports are slim while the remittances would remain attractive for the grey market.
Heavy taxes with exorbitant electricity prices have increased production costs, while the IMF is not ready to accept subsidies for any sector.
Bankers said the situation would also hurt exports this year. In the previous fiscal year, the country lost over $4bn due to a decline in exports and another $4.2bn due to a fall in remittances.
“The country needs a stable government with a defined economic policy to boost confidence for stability in the foreign exchange regime,” a banker said.
