Pakistan's rupee hit an all-time low in the interbank market on Tuesday, as import restrictions were eased, triggering a surge in demand for the US dollar.
To bolster its diminishing foreign reserves, Pakistan had enforced strict import limits since 2022. However, starting in June, these restrictions were gradually lifted, a condition tied to a $3 billion loan from the International Monetary Fund. The loan aimed to aid Pakistan's beleaguered economy facing a crisis.
Traders observed a 0.6% drop in the rupee, reaching 299 against the dollar, with a record closing low of 298.93 on May 11. This decline came just after the arrest of former Prime Minister Imran Khan, accused of land graft, deepening the country's political instability.
Amidst intense political tensions, Pakistan operates under a caretaker government, tasked with steering the nation towards a slated November election. Simultaneously, the economy grapples with high inflation and interest rates.
Tahir Abbas, head of research at Karachi's Arif Habib brokerage, anticipates the rupee to hover between 295 and 305 to the dollar. This downward trend, Abbas explained, is a result of eased import curbs and the clearance of backlog in goods and services. Moreover, multinational corporations repatriating profits have added to the rupee outflow.
Pakistan's economic landscape remains uncertain, subject to a complex interplay of internal and external forces that will continue to shape its financial trajectory.
