Pakistani rupee weakens further, falls to new low against UAE dirham

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Pakistani rupee plummeted to a record low on Tuesday due to rising demand for the dollar, surge in inflation and political uncertainty.

The interbank and open market rates continued to widen as well, putting the South Asian currency further under pressure. The rupee fell to 82.2 against the UAE dirham on Tuesday, while the open market rate hit 85.3.

The rupee broke through the psychological barrier of 300 against the US dollar on August 24 after the government eased import restrictions that lifted demand for the dollar.

According to the State Bank of Pakistan, total liquid foreign reserves held by the country stood at $13.25 billion as of August 18.

To support Pakistan’s economy, the International Monetary Fund (IMF) recently approved a 9-month, $3 billion financial loan. The program has also catalysed other, bilateral, lines of credit. Saudi Arabia deposited $2 billion at the State Bank of Pakistan (SBP), while the UAE deposited another $1 billion.

The Institute of International Finance projected that the rupee rate could drop to 317.1 against the dollar (86.4 against the UAE dirham) in 2024-25.

But analysts expect that the rupee could reach this level this year if the economy continues to weaken and a weak government comes into power after elections, which are scheduled in three-month time.

IIF, expecting a “lame-duck government” to be formed in the post-election period, remained wary of Pakistan’s financing needs for the 2023-24 fiscal year as well.

It expected a mere 0.3 per cent GDP growth for 2022-23 and 3.0 per cent for 2023-24 and 4.2 per cent for 2024-25 for the South Asian country.