The Pakistani rupee has touched a record low, while a bigger-than-expected interest rate rise has failed to revive its markets as the South Asian country struggles to unlock critical funding from the International Monetary Fund (IMF).
The rupee hit a record low of 284 per US dollar in local trading on Thursday, Eikon data showed. It retraced some losses to end at 279 per dollar, still down by some 6 percent.
To try to tackle soaring inflation, shore up its currency and fulfil another IMF demand, Pakistan’s central bank announced a larger-than-expected 300-basis-point interest rate hike.
Policymakers lifted the key lending to 20 percent, its highest level since October 1996, by bringing forward a meeting that had originally been scheduled for March 16.
The country’s international bonds fell by more than three cents in the dollar.
The currency, which has weakened by nearly 20 percent since the start of the year, has been sliding after delays in a deal between Pakistan and the IMF.
“A delay in IMF funding is creating uncertainty in the currency market,” said Mohammed Sohail of Topline Securities, a Karachi-based brokerage house.
The IMF funding is critical for the country, which has been in economic turmoil, to unlock other bilateral and multilateral external financing.
Pakistan’s central bank’s foreign exchange reserves have fallen to levels barely enough to cover three weeks of imports.
IMF demands
Pakistan entered a $6bn IMF programme in 2019, which was expanded to $6.5bn last year. It received a tranche of $1.17bn in August last year, but the next tranche of $1bn has not been released as IMF conditions are still unmet. Last month, Pakistani Prime Minister Shehbaz Sharif said the IMF conditions were “beyond imagination” but Islamabad had no choice but to agree to the bailout conditions.
