What?
Pakistani Rupee has been under pressure since last one year falling from PKR90 a year back to PKR98 against US dollar now in the interbank market. In last one month alone the local cuurrecny fell from 97.40 to 98.10. However, Mohammed Sohail, chief executive of Topline Securities, a brokerage firm in Karachi, Pakistan, said “the pressure in the kerb or open market where an individual can actually buy and sell currency is more. In the open market PKR crosses 100 mark against US currency but then gained marginally after central bank measures.”
Why?
“This fall is local currency is mainly due to IMF repayment,” Sohail told Gulf News. “Pakistan has to repay IMF loan that it got in 2008. Though the current account deficit is low and manageable which is below 1% of GDP, but the fact is that there has been hardly any inflows to match the IMF repayment. Due to deteriorating security situation coupled with energy crisis FDI has fallen below US$1bn this year from US$5bn in 2007.”
What’s next?
Pakistan repaid $145.79 million to the IMF on Monday and is scheduled to repay another $375 million on February 26, according to Syed Wasimuddin, spokesman for the country’s central State Bank. The rupee will likely continue to be under pressure because of the IMF payments, Sohail told Reuters last Monday.
What to do?
“Investors think that with declining forex reserves the repayment will affect Pakistan repaying ability,” said Sohail. “That is why they are aggressively buying dollar in the open market.”
