The Pakistani Rupee continues its descent for the third day running on Tuesday, influenced by the rising pressure of debt repayment due in June, the final month of the current fiscal year. Analysts warn that the currency may undergo a significant devaluation should there be any delay in the anticipated loan rollover and refinancing. The Rupee declined 0.12%, or Rs0.34, reaching a three-week low of Rs287.97 against the US dollar in the inter-bank market.
Contrarily, the currency saw a significant recovery in the open market, appreciating by 2.34%, or Rs7, to Rs298/$. This rebound can be attributed to increased governmental scrutiny of currency dealers.
Mustafa Mustansir, Director of Research at Taurus Securities, shared with The Express Tribune that his forecast of the Rupee devaluing to Rs295/$ in the inter-bank market by the end of June 2023 remains unaltered. He suggested the best case scenario would see the Rupee valued between Rs290 and Rs295 to a dollar by the month’s end. Notably, the Rupee reached a record low at Rs299/$ in the inter-bank market on May 11, 2023.
However, Mustansir expressed concern over potential significant devaluation in the forthcoming two weeks when the government is expected to repay $3.6 billion in foreign loans before the end of June. The Governor of the State Bank of Pakistan (SBP), Jameel Ahmad, announced recently that Pakistan is due to make a total payment of $3.6 billion this June. $400 million has already been paid, with an additional $900 million expected to be repaid within the month. It is anticipated that around $2.3 billion will be rolled over.
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Mustansir pointed out that delays in the rollover could exacerbate pressure on the Rupee, given the rapidly depleting foreign exchange reserves, currently standing at $3.9 billion.
Malik Bostan, the President of the Exchange Companies Association of Pakistan, informed the media that the significant appreciation of the Rupee against the dollar in the open market was the result of commercial banks supplying $5 million to currency dealers, as instructed by the central bank. Consequently, the gap between Rupee-dollar exchange rates in the inter-bank and open markets diminished to Rs10, compared to a record high of Rs27 about two weeks ago.
Bostan further revealed that the banks were expected to release an additional $5 million to currency dealers on Wednesday.
The improved performance of the Rupee in the open market influenced a sharp decrease in gold prices by around 2%, or Rs4,000, bringing it to a six-week low of Rs221,500 per tola (11.66 grams). Speculation in the market suggests that the pricing authority for gold takes into account the exchange rate prevailing in the open market to calculate the metal’s price. On the global front, gold slipped $2 to $1,961 per ounce.
