Dar-pegging has evolved into Dar-begging, following the Finance Minister’s appeal to charitable organizations to raise $2 billion from overseas Pakistanis, sending markets into a tailspin.
During intraday trade on Friday, the Pakistani rupee (PKR) fell nearly 2.5 percent against the dollar, reaching a low of 278.5 against the greenback after Finance Minister Ishaq Dar approved a plan for charitable organizations to help raise around $2 billion from ex-pats.
This is the third time in a week that the Pakistani rupee has lost Rs.7 or more against the US dollar during intraday trade, as markets continue to struggle.
Traders were taken aback by the FM’s comments yesterday and have been hesitant to engage in dollar trade because rates could fall even further. The rupee has lost over Rs. 6 since the market opened today, and the IMF talks have contributed to the decline. Dar’s public announcement of a dollar donation drive is a new low for the country.
The domestic currency has fallen by around 3% in the open market to a record low of 280 per US dollar, compared to last week’s lows of 261-266 per US dollar. The rupee fell 12.5 percent in the previous week, but the majority of the drop occurred at the end of the week, when the currency was finally ‘freed’ against the US dollar in the inter-bank market. Since then, the PKR has lost over Rs. 41, with a further loss of Rs. 7.14 today.
As part of the conditions for reviving the IMF bailout, the local currency is expected to depreciate significantly. No one can predict how low the currency will fall under the free-float model. Dar’s new economic stance may add even more spice to the mix.
This is an intraday market update.