The rupee lost further ground against the US dollar and was traded above 210 in the interbank during intra-day trading on Monday, as uncertainty around the International Monetary Fund (IMF)’s bailout programme and falling foreign exchange reserves take their toll.

“The major issue is uncertainty pertaining to the revival of the IMF programme, which is leading to the local currency devaluation,” Abdullah Umer, an analyst at Ismail Iqbal Securities, told Business Recorder.

The rupee was being traded at 210.19 on Monday morning, registering a depreciation of Rs1.44 against the greenback at the inter-bank. On Friday, the rupee had closed at 208.75 against the US dollar due to panic over the IMF $6 billion Extended Fund Facility and the fall in foreign exchange reserves held by the State Bank of Pakistan.

The government on late Thursday dropped “another petrol bomb,” a term it used when the PTI took such measures, on the people after increasing its price by Rs24.03 per litre to Rs233.89 per litre. The ending of fuel subsidy was one of the demands of the IMF for the revival of the programme.

Experts are hopeful that the Financial Action Task Force’s acknowledgement of both actions by Pakistan would have a positive impact on the economy.

The analyst said there are reports regarding a shortage of dollars in the inter-bank, which has added to the pressure on the rupee. He also said that a slowdown in remittance flows is expected in the coming days, amid a resumption of travel, which may further dent the forex reserves position and in the process the local currency as well.

During the course of the week, increased uncertainty over the EFF was witnessed as reports indicated that the lender was displeased with the Pakistan budget, driving sentiments that the IMF programme may get detracted.

Meanwhile, foreign exchange reserves held by the SBP fell under $9 billion, which added to the woes of the local currency.

Vice President of Pakistan Businesses Forum Ahmad Jawad recently said the devaluation of the rupee during the PTI government in the name of a “market-determined” exchange rate was a blunder, and now the PML-N government is continuing the same mistake.

He said Pakistan cannot afford a “dollarised” economy and the government should control dollar flights without any further delay.

“Dollarisation is a situation when the local currency loses its stability as a medium of exchange due to hyperinflation or instability and the same is happening in Pakistan,” he said.

The story was originally published in Business Recorder on June 20, 2022.