Business

Why is Pakistani rupee losing value against dollar?

Published

2 years ago

Farwa

With the rupee falling to new lows, stakeholders are concerned that the weakening currency could open up Pakistanis to a new round of inflationary impact, which will hit the lower and middle classes the hardest.

No sector of the economy would be immune from the fallout of the steep devaluation of the local currency — which has lost about 20% this year, among the worst performers in the world.

The rupee has gained and lost value in the past and it will do so in the future as well but this time the curve has maintained its upward trend since quite a few months now.

Economists Ankur Shukla and Abhishek Gupta, in an analysis given on Bloomberg Economics, have compiled the reason why the Pakistani rupee was so weak.

The analysts said that the capital is fleeing Pakistan because there is a growing risk that the International Monetary Fund (IMF) will not deliver a bailout, which is needed for the country to avoid default in the fiscal year starting from July. They suspected that political unrest was probably one of the reasons the Fund was baulking as the aid has been stalled since November.

They also pointed out the impact of political tumult on the rupee, stating that the country’s leadership has been unstable since Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan was ousted as the prime minister via a no-confidence motion vote in April last year.

“Khan’s arrest this month has escalated the face-off between him and the government, as well as the army,” they noted, recalling that the rupee plunged to a record low of 299 per dollar after Khan’s jailing but recouped its losses and settled at 285 after his release.

Warnings of a massive drop in the rupee are flaring up, with some analysts forecasting another 20% decline is possible. Both economist also cautioned that the currency will likely fall further if Khan and the government continue to clash and if the IMF chooses not to provide loans.

Adil Ghaffar, chief executive officer at Premier Financial Services Pvt in Karachi also told Bloomberg that therupee may slump to as low as 350 per dollar in June if Pakistan fails to secure the loan.

“The rupee trajectory remains subject to considerable uncertainty as market sentiment is fragile,” Farooq Pasha, an economist in Karachi, said, adding that politics will remain the key risk in the near-term until the elections.

Moreover, bond investors are also growing more nervous, with the extra yield they demand to hold Pakistan’s dollar bonds over US Treasuries climbing above 35% points to a record this month.

Why is Pakistani rupee losing value against dollar?

Pakistan’s dollar bonds are trading at distressed levels, with notes due in 2031 quoted at about 34 cents on the dollar.

The country’s dollar stockpile, which stood at $4.3 billion in mid-May, is also not enough to cover even one month of imports despite heavy restrictions.

Business

SFD and Pakistan Sign Two Deals Totaling $1.61BLN

Published

24 hours ago

Farwa

Two agreements totaling $1.61 billion have been inked by Pakistan and the Saudi Fund for Development to improve their bilateral economic cooperation.

Business

Saudi Arabia and Pakistan sign an MOU to strengthen their auditing industry collaboration.

Published

24 hours ago

Farwa

A spokesperson for the office of the Auditor-General of Pakistan (AGP) announced on Monday that the two countries have signed a Memorandum of Understanding (MoU) to strengthen cooperation in public sector auditing through improved cooperation between audit institutions of both countries, as well as training programs and the exchange of trainers.

This comes as a group from Saudi Arabia’s General Court of Audit (GCA), headed by GCA President Dr. Hussam bin Abdulmohsen Alangari, arrived in Pakistan on Sunday for a four-day visit.

The agreement was signed during AGP Muhammad Ajmal Gondal’s meeting with the Saudi delegates, aiming to strengthen audit cooperation, enhance knowledge-sharing, and improve governance, transparency and accountability in government spending.

Public relations officer Muhammad Raza Irfan of the AGP’s office told Arab News that the deal will further advance bilateral collaboration between Saudi Arabia and Pakistan in addition to enhancing professional ties between the two nations’ auditing institutions.

In a statement released from his office, AGP Gondal was cited as saying, “This collaboration marks a significant step toward fostering international cooperation in auditing.”

“The exchange of ideas and methodologies will undoubtedly strengthen our capacity to meet emerging challenges and set new benchmarks for public accountability.”

Discussions at Monday’s meeting focused on fostering closer ties between the Supreme Audit Institutions (SAIs) of Pakistan and Saudi Arabia, sharing innovative audit methodologies, and planning collaborative initiatives for the future, according to the AGP office.

The two parties decided to increase their knowledge of theme, environmental, and impact audits as well as to exchange best practices in audit standards, performance audits, and citizen participation audits.

The statement added, “It also agreed to exchange trainers, address new auditing challenges, plan cooperative audits, including a performance audit on the oil and gas sector in 2025, and work together on training programs.”

Both sides reaffirmed their shared commitment to promoting transparency, accountability and excellence in public sector auditing.

Business

The government chooses to continue the PIA privatization process.

Published

1 day ago

Farwa

The Pakistan International Airlines (PIA) privatization process will be restarted by the federal government, and expressions of interest would be requested within the month. Officials stated that the Prime Minister’s Committee on Privatization will convene to make the final decision.

Usman Bajwa, the secretary of the Privatization Commission, gave a briefing on the updated procedure to the National Assembly Standing Committee on Privatization. Additionally, he disclosed that airlines other than PIA are now able to compete with regional carriers thanks to IMF-approved aircraft tax concessions.

Farooq Sattar, the chairman of the privatization committee, underlined the importance of giving PIA workers at least five years of job security. Employee protection will continue to be a top priority and will be resolved prior to bidding, the Privatization Commission promised.

PIA’s liabilities totaling Rs650 billion have already been assumed by the government, and an additional Rs45 billion in outstanding debts must be paid before the privatization process can begin. As of the now, PIA has assets around Rs155 billion and liabilities worth Rs200 billion. It will be necessary for the new buyer to expand the fleet by 15 to 20 aircraft.

Additionally, the Privatization Committee has sought a timeline for the privatization of Faisalabad, Gujranwala, and Islamabad Electric Supply Companies. Officials stated that after the appointment of a financial advisor, the privatization process for these companies will accelerate.