Pakistani rupee shed Rs6.03 or 5.0 percent against US Dollar on Thursday after the government agreed with the International Monetary Fund (IMF) to remove controls on currency exchange value letting the market forces determine the rupee value.
On Thursday Rupee closed Rs 147.50 against USD in interbank, closed same in the cash free market.
The demand was higher from the importers and corporate sector, while the recent numbers showing no increase in exports dampened market sentiments.
Malik Bostan, President Forex Association of Pakistan said rupee weakened by Rs3.55 against the greenback in the cash free market.
The fall in the rupee’s value comes a day after Prime Minister Imran Khan set up a committee, headed by Adviser to the PM on Finance Dr Hafeez Shaikh, to control devaluation of the local currency and capital flight from Pakistan.
Dealers said the dollar is not easily available in the market, and exchange companies are not in a position to provide any large amount of dollars.
Meanwhile, the country’s business community has criticized over 5.0 percent depreciation in the rupee value saying this would further increase cost of production leaving Pakistani products uncompetitive in the international market, as well as discourage investment in the industrial expansion.
Analysts believe that as per the deal with IMF, the interest rates would also be increased in the upcoming monetary policy, while prices of gas and electricity are also expected to go up significantly.
The equity market took the currency devaluation quite seriously and panic selling was witnessed in the early hours. “Weaker rupee against US dollar adversely impacts the corporate earnings as this increases the cost of doing business. So we expect weaker earnings going forward,” analysts said.
There is a lot uncertainty in the market regarding currency value, interest rates and utility rates. “Commitments made with IMF were not disclosed so there is much uncertainty in the market about everything.”
Taking notice of the devaluation of rupee against the US dollar, Prime Minister Imran Khan had ordered crackdown against money changers companies selling dollar above market rate.
As per details, the premier had chaired a special meeting to review sudden surge in the dollar’s value.
The meeting also had a delegation of Forex Association of Pakistan (FAP) in presence. In the meeting, FAP delegates assured of not supporting companies selling foreign currency at higher rates.
Chairman FAP Malik Bostan has said that the association is vigilant on hoarders.