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Rupee hits another all-time low vs dollar

Rupee hits another all-time low vs dollar

KARACHI: The repayment of International Monetary Fund’s (IMF) Stand-by Arrangement of $145.10 million loan has put pressure on the local currency against the dollar as the local currency hit a record-low level of Rs 102.90 for buying in the interbank market on Friday.

The currency dealers said in open market the local currency changed hands at Rs 103.35 for buying against the greenback on back of recent past loan payment.

Market pundits predicted the rupee to go further down within the next few weeks as demand for the dollar was increasing and the importers were requiring more dollars to pay for their orders.

Fazal Ahmad a currency expert in Houston said the average greenback value against the rupee was close to Rs 98 in December 2012 in contrast to Rs 59.09 in December 2001. Today it marks a 65 percent-plus depreciation of the rupee against the dollar.

The payment in dollar for edible oil imports usually increases in September to November on back of increase in edible oil and vanaspati ghee domestic consumption in winter, he added.

The country’s foreign exchange reserves for payment of export bills and bills on oil, commodities and major raw industrial materials’ imports are also under immense pressure as demand for dollar has increased.

The constant fall in value of the rupee was multiplying the cost of doing business, especially for those who relied on imported industrial raw materials and machinery.

Moreover, this situation was inflating the overall import bill of the country, as Pakistan was importing large quantities of oil among other items to meet its ever-growing needs.

Pakistan was relatively rich in mineral resources and held strong potential for small businesses to flourish however, the rupee’s depreciation was stagnating the growth of these sectors and the government needed to give serious thought on harnessing the untapped mineral resources in order to improve exports.

Encouraging the local industry for enhancing exports and luring foreign investment through good incentives were some of the effective tools that the government could utilise to curb the downslide of the rupee.

Impact on consumers’ life: Depreciating rupee increases the cost of imports, which has a direct bearing on inflation. Basically import of goods becomes costlier whenever rupee depreciates as it always makes an impact on peoples’ day-to-day life as they are consumers of imported products.

Cost of petroleum products’ import is also bound to go up with the fall in value of domestic currency.

Increased inflation means more expenses, which in turn has potential to impact the financial planning process.

The falling rupee also hits finances of a number of foreign countries-based students who pay more on their education after every fall in rupee value.

Falling rupee is also a way for slowdown in economic growth. If the fall of rupee continues, the foreign investment will dry up thus creating a gap between investment required for growth and the actual investment made.

High inflation has caused the rupee to reach this stage. The demand for dollar has been strong because of higher imports day by day.

On the IMF front, Pakistan has to repay $4.4 billion in the next three years ($3.3 billion in FY14, $1.3 billion in FY15 and $0.60 billion in FY16).