KARACHI, Pakistan (AA) – The Pakistani rupee tumbled to an all-time low on Thursday against the US dollar days after a cash-strapped Islamabad agreed to accept a key International Monetary Fund (IMF) demand for removal of an unofficial cap on exchange rate.
The value of the dollar shot up by 24.25 Pakistani rupees to an all-time high of 255 rupees in the interbank market, according to the foreign exchange dealers. It closed the day at 250.
With an increase of 12 rupees in the open market, the greenback was traded at Rs255, thus narrowing the gap between interbank and open market exchange rates.
Thursday’s fall came close on the heels of Prime Minister Shehbaz Sharif’s announcement last week that Islamabad was ready to accept “all IMF demands” to win the long-stalled $1.8 billion tranche of a $6 billion bailout package.
The latest devaluation is seen as a result of a key IMF condition for Pakistan to institute a market-determined exchange rate.
Depreciating foreign reserves and a staggering $60 billion import bill had left the central bank – the State Bank of Pakistan (SBP) – with no option but to lift a de-facto cap that artificially controlled the rate, said Malik Bostan, the head of Pakistan Forex Dealers Association.
Pakistan currently has foreign reserves of around $10 billion, of which slightly over $4 billion is possessed by the State Bank of Pakistan.
The SBP, this week, also raised interest rates to a 24-year high to fight surging prices.
Pakistan sealed a $6 billion bailout package with the IMF in 2019 to prop up a slowing economy.