Rupee closed at Rs255.43 against US dollar after streamig to ‘free-float exchange rate’

Pakistani rupee got enormous blow in the interbank market during intraday trade as it depreciated by more than Rs24, a day after the lifting of the unofficial cap in the open market.The local currency was trading at Rs255 against the dollar during intraday trade.

In the interbank market, the PKR closed at Rs255.43 per dollar, according to data from the State Bank of Pakistan (SBP). This equates to a depreciation of Rs24.54, or 9.61 per cent, from yesterday’s close of Rs230.89.

It was the largest single-day decline in both absolute and percentage terms since the introduction of the new exchange rate system in 1999.

The rupee was bound to see significant depreciation as Pakistan moved to meet conditions of the IMF to revive its bailout programme.

“This was a market-driven rate and a sign that we are moving closer to reviving the stalled IMF programme,” anlayst said.The market expert said the development was much-needed as capping the inter-bank rate only led to a creation of the grey market.

“Exporters were not bringing their proceeds, while remittances declined as customers moved towards illegal channels offering premium rates,” he said.

The depriciation is seen a much needed step.You cannot fight market forces. The market always wins,” said the analyst.

“This development will improve the dollar supply to a significant extent. The IMF programme revival is just around the corner now. We could see major news regarding it in the next 10-15 days.”

The IMF has asked Pakistan to implement a market-based exchange rate, lift restrictions on imports, increase taxes and electricity prices. However, so far, the government has not yet taken any of these measures and is waiting for a formal engagement with the global lender before kicking in these actions.

Pakistan made a payment of $500 million to a Chinese commercial bank that has now pulled down the reserves to a level that cannot be described as comfortable by any standards.