Pakistani rupee drops sharply, removal of unofficial controls rattles market

The rupee closed at 230.40 to the dollar on Wednesday in the inter-bank, and slipped to 238 rupees early on Thursday when the market reopened

Reuters
Published : 26 Jan 2023, 08:23 AM
Updated : 26 Jan 2023, 08:23 AM

The Pakistani rupee plummeted about 5% in early open market trading on Thursday against the US dollar, according to trade data, in a second day of turmoil in the domestic currency market after unofficial controls were removed.

The rupee fell 1.2% in the open market on Wednesday after foreign exchange companies removed a cap on the currency, saying it caused "artificial" distortions for an economy in desperate need of International Monetary Fund help.

The official, or inter-bank, rate, which remained largely unchanged a day earlier, also saw the rupee lose nearly 3% of its value on Thursday.

The rupee closed at 230.40 to the dollar on Wednesday in the inter-bank, and slipped to 238 rupees early on Thursday when the market reopened, trade data from various investment houses showed.

"We requested the central bank to increase the interbank (rate) to help combat the black market," Exchange Companies Association of Pakistan (ECAP) President Malik Bostan said.

The State Bank of Pakistan (SBP) did not immediately respond to request for comment.

The rupee extended its sharp drop in the open market too, falling from 243 rupees to the dollar to 255 - a 4.95% drop - according to an ECAP update.

The move towards a market-based exchange rate should be welcomed by the IMF, as it's one of the conditions that the multilateral lender has set before it agrees to unlock a stalled bail-out programme for Pakistan.

Finance Minister Ishaq Dar's recent attempts to defend the rupee, including reported currency market intervention, had run counter to the IMF's advice.

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Editor-in-Chief and Publisher