This is the third devaluation of PKR in the last seven months.
Pakistani rupee on Monday plunged below 32 against the UAE dirham as the country’s central bank didn’t intervene to arrest the slide in the currency which is believed to be orchestrated to encourage more forex inflow into the country.
The rupee, which hit a low of 32.25 on Monday, came under pressure due to balance of payment (BoP) crisis amidst shortage of dollar in the market and decline in the foreign exchange reserves.
This is the third devaluation of PKR in the last seven months. The currency was earlier devalued by 5 per cent each time in December 2017 and March 2018.
Industry analysts believe that the currency will remain under pressure due to BoP problem and could hit 33 before new elected government comes into power after July 25 elections.
“It is an orchestrated devaluation move by government because under normal circumstances, you don’t see such large depreciation. The rupee today went past 32 mark against UAE dirham today and it looks like it will go down further,” said Sudhesh Giriyan, chief operating officer, Xpress Money.
“We had predicted it will go beyond the current level because balance of payment had worsened and oil prices are high, hence, the country is struggling for the dollar,” he said, adding that in such times when devaluation happens, expats send more money home.
Rajiv Raipancholia, CEO, Orient Exchange, believes that since caretaker government is currently in place in Pakistan ahead of general elections in July, it cannot take any policy decision and the foreign exchange reserves of the country have already gone down drastically.
“Since, there is no effective government mechanism for the next two months, rupee started to depreciate against US dollar. On Monday morning, the rupee fell to a low of 32.25 against dirham as against 31.46 closing on Sunday. If the trend continues, the PKR can hit 33.2 against the dollar also before new elected government comes into power,” he added.
Raipancholia had earlier forecasted in May that the rupee could hit 38 against dirham by 2020.
The State Bank of Pakistan on Monday said remittances from overseas Pakistanis reached $18 billion in the first 11 months of 2018-19 financial year, showing an increase of nearly three per cent.
Xpress Money’s Giriyan predicted that more dollars will be flowing into the South Asian country due to the planned devaluation by the government and expats, too, look at this an opportunity to send more money which will ease the pressure for the dollar shortage.
“Ramadan sees double-digit growth in remittances. As you get closer to Eid holidays, there is a real surge in remittances. The maximum surge in remittances is witnessed during 3-4 days prior to Eid when remittances jump more than 20 per cent on a month-on-month basis,” Giriyan added.