Meteoric Dollar Smashes All Records & Reaches Rs200 In The Interbank Market
May 19, 2022 / By Zunair Tahir / Business News
US dollar hit Rs200 in interbank trade on Thursday morning, up Rs1 from the previous day’s closing of Rs199, according to statistics from the Forex Association of Pakistan (FAP).
Around 11 a.m., the US dollar hit an all-time high of Rs200, according to the FAP.
The greenback had made a huge gain of more than Rs2 from Tuesday’s close and closed at Rs199 at the end of the session, the latest in a succession of new highs for the US currency since last Tuesday.
While the FAP reported the previous day’s closing rate as Rs199, the State Bank of Pakistan reported the rate as Rs198.39, which is still close to the Rs200 mark that the international currency is expected to reach earlier in the day due to the country’s rising import bill, growing current account deficit, and depleting foreign exchange reserves.
In the open market yesterday, the dollar had already touched Rs200.
‘The Darkest Day’
Some analysts are upset with the achievement. FAP Secretary General Zafar Paracha told Dawn.com that today was the “blackest day” in Pakistan’s history due to the current currency rate.
In a statement to Dawn.com, FAP chairperson Malik Bostan requested the Federal Board of Revenue (FBR) to issue statutory regulatory instructions for the execution of import restrictions.
Meanwhile, Asad Rizvi, a former Chase Manhattan treasury chief, told Mettis Global, a web-based financial data and analytics portal, that “pension costs, circular debt [of] Rs2.5 trillion, public entities [worth] Rs1.2 trillion, and fiscal deficit of nearly 8% are not sustainable and adding pressure” on the rupee.
Meanwhile, the “independent SBP” was “not bothered by the PKR collapse, perhaps waiting for [an] IMF decision,” according to the Mettis Global report.
Rising oil prices have already increased the country’s oil import expenses in recent weeks, and overall imports are also at an all-time high. Imports soared by 72 percent in April, leaving the government with no room to repair its external balance.
Furthermore, the central bank’s foreign exchange reserves have dropped to $10.3 billion, the lowest level since June 2020.
Currency traders believe the unexpectedly large import bill and little foreign investment were not supportive of the currency rate, while the government already faced a $13 billion current account deficit.
The news comes after Pakistani officials resumed talks with the International Monetary Fund (IMF) yesterday, in which Finance Minister Miftah Ismail sought to dispel doubts on two fronts: that the new coalition government would stay in power and take tough decisions, as well as that the original fund program’s reforms would be implemented and structural benchmarks would be met.
According to informed sources, the negotiations began on a positive note, with both parties agreeing on important concepts such as separating the state’s economic decision-making from politics.
According to these sources, the government would revise gasoline and energy prices within days and implement a complete ban, rather than increase tariffs, on a total of approximately 30 luxury products, including cars and cellphones, as well as some smaller things, to limit imports and therefore external accounts. These announcements will be made soon in order to forward discussions toward a satisfactory conclusion of the revised program.
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