As per the State Bank of Pakistan (SBP), the rupee closed at 182.34, its weakest level in history, after a day-on-day depreciation of 15 paisas.

The rupee has lost nearly 16.5% since its most-recent high achieved in May last year. On a fiscal year to date (FYTD) basis, the local currency has depreciated by over 13.5%.

Falling foreign exchange reserves and concerns pertaining to a high import bill in wake of rising commodity prices especially oil have taken a toll on market sentiment.

Oil prices, a key factor of currency parity, dropped on Tuesday, extending losses from the previous day as Ukraine and Russia headed for peace talks and on fears of a drop in fuel demand in China after the financial hub of Shanghai shut down to curb a surge in COVID-19 cases.

Brent crude futures were trading down $1.18, or 1.1%, at $111.30 a barrel, having dipped as low as $109.97. U.S. West Texas Intermediate (WTI) crude futures hit a low of $103.46 in early trade and were down $1.09, or 1.0%, at $104.87.

Another record low: Pakistan’s rupee crosses 182 level in inter-bank market

The fall in rupee comes as the federal government has expressed apprehensions over the impact of both domestic and external factors on the economy of Pakistan.

The Ministry of Finance, in its monthly ‘Economic Update and Outlook’ released on Monday said “recent geopolitical tensions, in particular, the Ukraine crisis, present the most important external risk factor”.

“Likewise, domestic political conditions are building domestic risks. A further escalation of these risks could jeopardise the positive outlook for Pakistan’s economy and may also aggravate the macroeconomic imbalances,” said the Ministry of Finance.

The ministry was optimistic that exports in March would continue their upward trend.

Meanwhile, Asad Rizvi, Ex-Country Head at Chase Manhattan, said that the current economic growth is not enough to counteract the negative impact of deteriorating political conditions and declining foreign exchange reserves.

“PKR continues to hit all-time new lows on a regular basis due to worsening of the political condition and depleting of foreign exchange reserves. Economic growth is not sufficient to plug the weakness and fill the gap,” he said.

The story was originally published in Business Recorder on March 29, 2022.