Weak economic fundamentals caused the Pakistani rupee to fall to a six-week low on Friday in the interbank market at Rs223.17 to the dollar as importers questioned whether the flow of the dollar would improve soon.
In addition to the decline in the value of the currency, Pakistan's global Sukuk yield, which is due to mature next month, increased by 568 basis points to 98.96%, fueling speculation that the nation could default on the $1 billion Sukuk.
According to the State Bank of Pakistan, the rupee's decline continued for the sixth straight working day as the currency fell by 0.22% (or Rs0.50) to settle at Rs223.17 (SBP). In the past six days, it has lost a total of 0.79% (or Rs1.75).
Even though the decrease was negligible, Ismail Iqbal Securities Head of Research Fahad Rauf told The Express Tribune that "weak economic fundamentals have caused its (rupee's) fluctuation."
It came in the backdrop of a “fall in Pakistan’s textile exports that hit a 17-month low at $1.35 billion in October”. Pakistan’s textile sector alone earns around 60% of the total export proceeds.
Overall, export earnings and workers’ remittances are expected to stay low in November after registering a decline in October, he said. “The development may mount pressure on the rupee.” Rauf was of the view that the rupee had remained under pressure in the face of persistent delay in ninth review of the International Monetary Fund’s (IMF) $6.5 billion loan programme, outflow of $1 billion from the foreign currency reserves a week ago and postponement of Saudi crown prince’s visit to Pakistan.
It happened against the backdrop of "a decline in Pakistan's textile exports, which in October touched a 17-month low of $1.35 billion." About 60% of all export revenue in Pakistan comes from the textile industry alone.
After experiencing a dip in October, he predicted that overall export revenues and worker remittances would remain low in November. "The development could put the rupee under pressure." According to Rauf, the rupee has continued to be under pressure as a result of the ninth review of the $6.5 billion loan programme from the International Monetary Fund (IMF) being delayed repeatedly, the withdrawal of $1 billion from foreign exchange reserves a week ago, and the postponement of the Saudi crown prince's visit to Pakistan.
The crown prince was anticipated to make a historic declaration regarding a $10 billion investment in Pakistan.
In the present cycle, according to Rauf, the rupee will fluctuate only between 220-230 versus the dollar.
If Pakistan obtains the anticipated inflows from the IMF and World Bank, it will stabilise around current levels (in December and January). However, additional delays in receipt realisation could push the rupee as low as Rs240–250.
