Pakistani rupee, stocks continue downward trend, experts blame country's political turmoil

Islamabad [Pakistan], July 21 : With the rupee hitting a record low level, losses at the Pakistan Stock Exchange (PSX), high inflation and low forex reserves of the country recently, experts in Pakistan believe that the delay in the loan facility from IMF and domestic political upheaval created a temporary economic crisis in the country.
The downward spiral of the Pakistani rupee continued on Thursday for the fourth consecutive day of the week, with the currency closing at a historic low of over 226 rupees against the US dollar, Xinhua reported.
The dollar touched an all-time high of 224.92 against the Pakistani rupee on Wednesday. However, according to the country's central bank, it slid by 0.83 per cent against the greenback to touch 226.81 rupees on Thursday.
Besides the local currency, the PSX also remained under massive pressure, with all the major indexes landing in a red zone this week as investors offloaded their stockholdings amid selling pressure.
The PSX's benchmark KSE 100-Index went down by 1.55 per cent or 627.95 points to close at 39,831.75 points on Thursday compared with 40,459.70 points reported on Wednesday.
Pakistani experts believe that the delay in the release of a loan facility from the International Monetary Fund (IMF), depleting forex reserves, the recent negative Fitch rating on Pakistan from stable to negative, and domestic political upheaval created a temporary economic crisis in the country.
An Islamabad-based political economist, Farhan Bokhari said that the recent developments on the economic and political fronts demand special steps to cushion common citizens struggling from record-high inflation, unemployment and diminishing purchasing power.
"Loan facility from the IMF under the recent agreement between Pakistan and the IMF and funds from other sources will ease pressure on the rupee and forex reserves," he said, adding that it is high time for the government to make reforms and policies for minimum reliance on foreign financial institutions for loans, reported Xinhua.
Bokhari said that all politicians including the government and the opposition should put their political differences aside and need to work together for economic and political stability in the country.
Meanwhile, the business community gathered at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) to analyse the looming threat of a Sri Lanka-like economic emergency.
FPCCI President, Irfan Iqbal Sheikh has called out the free-floating exchange rate of the State Bank of Pakistan (SBP) as the petroleum imports were being opened at a much higher rate than the interbank rate and have emphasised applying regulatory tools to minimise economic uncertainty, Dawn reported.
"We are not far from a Sri Lanka-like scenario and radical decisions are needed to reverse the situation," he warned, adding that the country does not even have enough foreign exchange reserves to cover two months of imports.
Federal Minister for Finance and Revenue Miftah Ismail said on Wednesday that the current downturn of the rupee against the US dollar was not due to economic fundamentals but because of political uncertainty.
In another statement, Patron Karachi Wholesalers Grocers Group (KWGA) Anis Majeed said the landing cost of imported pulses had increased by Rs 7-8 per kg in the last 10 days due to continuous rupee deprecation against the dollar and its impact had not been passed to the wholesale rates by the traders due to uncertain future exchange rates.
Pulses imports have decreased by 29 pc to 897,352 tonnes (USD 611m) in FY22 from 1.266m (USD 709m) in FY21. The average per tonne price rose to USD 681 from USD 560.
The price of kerosene has been fixed at PKR 211.43 per litre, jumping 73 per cent since May 26 from PKR 118.31 per litre.
Also, the ex-depot price of light diesel oil has been set at PKR 207.4 per litre, increasing 68.5 per cent from PKR 125.56 per litre in May.
Imran Khan-led Pakistan Tehreek-i-Insaf (PTI) on Wednesday criticised the Shehbaz Sharif government for the free fall of the Pakistani Rupee against the US dollar and the worsening economic crisis in the country.
Taking a dig at Pakistan Muslim League-Nawaz (PML-N), Imran Khan said that the economic crisis in the country shows that Sharif never had any expertise in running the economy or administration, adding that their only expertise includes looting, money laundering and getting NROs, the Dawn newspaper reported.
"When US regime conspiracy's VoNC [vote of no-confidence] was tabled, USD was at PKR 178. Today it is PKR 224 and in freefall despite the IMF agreement. The economic meltdown shows Sharifs never had any expertise in running the economy or administration. Their only expertise is looting, money laundering and getting NROs," the PTI chief said in a tweet.
PTI led by former PM Imran Khan, who was ousted from power through a no-confidence motion in April, bagged more seats in recently held by-polls in the largest Punjab province than the incumbent government political parties, creating political uncertainty in the country.
"The political uncertainty in the country due to the by-elections in Punjab and the import payment pressure took the currency to its new low," Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq said.
Pakistan's ruling PML-N party is set to lose its provincial government in Punjab province, after a decisive win by Imran Khan's PTI in the byelections to 20 seats held on Sunday. The Khan-led PTI won 15 seats while PM Sharif's PML-N managed to secure just 4 seats. One seat went to an Independent.