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Rupee closes at record low of 239.65 against dollar

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  • Pakistani rupee plunges to 239.65 after losing 0.74.
  • Rupee registers losses for 14th consecutive session.
  • Dollar was at an all-time high of 239.94 on July 28, 2022.

KARACHI: The Pakistani rupee continued to fall for the 14th consecutive session on Wednesday and hit a record historic low against the US dollar, with analysts expecting further depreciation of the local unit.

The rupee has been one of the worst performing currencies in the emerging markets and has fallen by nearly 9% so far this month owing to wide-ranging factors.

In the interbank market, the rupee plunged to 239.65 after losing 0.74, according to the data from the State Bank of Pakistan (SBP), down in value from the previous session’s close of 238.91.

The dollar now stands only Rs0.29 short of the all-time high level of Rs239.94 on July 28, 2022.

The heavy flooding and the lifting of a ban on imports have created pressure on the local unit, but the country is looking toward aid from friendly countries and multilateral and bilateral institutions to overcome the persisting economic crisis.

Floods have affected 33 million Pakistanis, inflicted billions of dollars in damage, and killed over 1,500 people — creating concern that Pakistan will not meet its debts.

Pakistan was able to resume the International Monetary Fund’s programme (IMF) and get a $3 billion rollover from Saudi Arabia, but the unprecedented floods have overshadowed everything else and led to a hit of at least $18 billion to the economy, which could go as high as $30 billion.

Samiullah Tariq, the head of research at Pak-Kuwait Investment Company, said: “[There’s] a greater demand than supply; floods have added to the import bill; aid hasn’t arrived in cash yet, but once it does, the liquidity position will ease.”

A weakening currency may worsen the price pressures after inflation surged to the highest in almost five decades. The nation is also grappling with the aftermath of a series of deadly floods and needs additional funds beyond the IMF’s $1.1 billion loan to avert a default.

The advent of floods and their negative effects on the country’s external account are to blame for the recent slide in the currency.

The loss of crops will now have to be made up for through imports and weak external flows, which have remained low since the signing of the IMF deal.

The $1.1 billion IMF loan tranche did help Pakistan improve sentiment, saving the country from default. However, additional inflows from the Middle East nations were anticipated to follow.

These inflows have not arrived yet, according to analysts.

In the past several months, investments and loans totalling $9 billion from Saudi Arabia, the United Arab Emirates, and Qatar have been promised to Pakistan.

While Saudi Arabia has already extended a $3 billion deposit that was due in December as part of that help for one year, the three countries have not yet distributed any new investments and have not provided a timeline for when they intend to do so.

The government is worried about a free fall of the rupee and is considering some steps to stabilise the foreign exchange market. Recently, the State Bank of Pakistan issued a show-cause notice to eight banks for selling dollars at prices higher than the current market rate, Finance Minister Miftah Ismail revealed over the weekend, to stop the rupee’s wild decline.

“The IMF loan was more to do with sentiment and was expected to be followed by inflows from other friendly countries,” said Sana Tawfik, economist at Arif Habib Ltd. in Karachi.

“These things were to materialize, but we don’t see any inflows yet.”

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In interbank trade, the Pakistani rupee beats the US dollar.

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In the international exchange market, the US dollar has continued to weaken in relation to the Pakistani rupee.

The dollar fell to Rs278.10 from Rs278.17 at the beginning of interbank trading, according to currency dealers, a seven paisa loss.

In the meantime, there was a lot of turbulence in the stock market, but it recovered and moved into the positive zone. The KSE-100 index recovered momentum and reached 116,000 points after soaring 1,300 points.

Both currency and stock market swings, according to analysts, are a reflection of ongoing market adjustments and economic uncertainty.

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Phase II of CPEC: China-Pakistan Partnership Enters a New Era

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The cornerstone of economic cooperation between the two brothers and all-weather friends is still the China-Pakistan Economic Corridor, the initiative’s flagship project.

In contrast to reports of a slowdown, recent events indicate a renewed vigour and strategic emphasis on pushing the second phase of CPEC, known as CPEC Phase-2, according to the Ministry of Planning, Development, and Special Initiatives.

According to the statement, this crucial stage seeks to reshape the foundation of bilateral ties via increased cooperation, cutting-edge technology transfer, and revolutionary socioeconomic initiatives.

Planning Minister Ahsan Iqbal is leading Pakistan’s participation in a number of high-profile gatherings in China, such as the 3rd Forum on China-Indian Ocean Region Development Cooperation in Kunming and the High-Level Seminar on CPEC-2 in Beijing.

His involvement demonstrates Pakistan’s commitment to reviving CPEC, resolving outstanding concerns, and developing a strong phase-2 roadmap that considers both countries’ long-term prosperity.

At the core of these interactions is China’s steadfast determination to turn CPEC into a strategic alliance that promotes development, progress, and connectivity.

Instead of being marginalised, CPEC is developing into a multifaceted framework with five main thematic corridors: the Opening-Up/Regional Connectivity Corridor, the Innovation Corridor, the Green Corridor, the Growth Corridor, and the Livelihood-Enhancing Corridor.

With the help of projects like these, the two countries will fortify their partnership, and CPEC phase-2 will become a model of global economic integration and collaboration that benefits not just China and Pakistan but the entire region.

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The inflation rate in Pakistan dropped to its lowest level.

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On December 2, core inflation as determined by the Consumer Price Index (CPI) significantly slowed, falling to 4.9% in November 2024 from 7.2 percent in October 2024.

The CPI-based inflation rate for the same month last year (November 2023) was 29.2%, according to PBS data.

Compared to a 1.2% gain in the prior month, it increased by 0.5% month over month in November 2024.

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