A series of negative economic developments ended the rupee’s five-session appreciation run, as the currency ended the week marginally lower at 197.92 against the US dollar in the inter-bank market.
As per the State Bank of Pakistan (SBP), the currency closed at 197.92 after a day-on-day depreciation of 33 paisas, or 0.17% on Friday.
The currency has still recovered almost 2% since it hit a historic low of 202.01 on May 26, 2022.
Fifth day of gain: Rupee appreciates to 197.59 against US dollar
Sentiments in the currency market turned negative after Thursday’s developments, which turned out to be an eventful day on the economic front.
In a major blow, Moody’s Investors Service (Moody’s) downgraded Pakistan’s outlook to negative from stable, while it maintained a B3 local and foreign currency issuer and senior unsecured debt ratings.
It said Pakistan’s weak institutions and governance strength adds uncertainty around the future direction of macroeconomic policy, including whether the country will complete the current International Monetary Fund (IMF) Extended Fund Facility (EFF) programme and maintain a credible policy path that supports further financing.
The development was followed by an alarming decline in SBP’s foreign exchange reserves that decreased by $366 million in the period between May 20 to May 27 to stand at $9.72 billion.
However, another surprise came later as Finance Minister Miftah Ismail announced that the federal government has increased the petroleum prices by another Rs30 per litre, taking it to its highest level, to meet an IMF condition for revival of the EFF program.
Economic experts have expressed concerns about the recent developments, projecting ‘tough times’ for the Pak rupee.
“It’s quite a mixed bag of economic evidence, as things are surely not in order,” said Asad Rizvi, ex-Country Treasurer of Chase Manhattan Bank, while adding that economic uncertainty would prevail for the time being.
“Tough times for Pak rupee, as signs are not healthy,” he said, while pointing out a widening trade deficit, hike in petrol prices and plunge in reserves.