Rupee becomes worst performer in Asia
Published on: September 3, 2021.
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KARACHI: Pakistani rupee has become the worst-performing currency in Asia compared to its status as world’s best performer six months ago, as it hit a 13-month low of Rs166.98 against the US dollar in the inter-bank market due to a surge in demand for the greenback to pay for imports.
The local currency has depreciated almost 10% (or Rs14.71) in the past four months, becoming the “worst performer in Asia … (in) a basket of 13 currencies compiled by Bloomberg,” Bloomberg reported on Thursday.
The rupee hit a 22-month high of Rs152.27 in May 2021 but since then it has been on a downturn.
Earlier in March 2021, it emerged as the world’s best-performing currency, when it appreciated the most (4.09% to Rs153.55) against the US dollar from the opening level of January 1, 2021.
Arif Habib Limited Head of Research Tahir Abbas said that the trade deficit, which widened to a record high of over $4 billion in August 2021, “suggests that demand for foreign currency has remained significantly high for soaring import payments compared to sluggish export earnings.”
“The situation took a toll on the Pakistani rupee,” he told The Express Tribune.
“This (rupee becoming Asia’s worst performer) is surprising,” AKD Securities CEO Farid Alam said while talking to The Express Tribune.
The world market ran on perception and “we and the media are developing a negative perception (of the Pakistani currency) these days,” he said.
He was surprised to note that the rupee maintained its downtrend on the day (August 24) the country received a significant amount of $2.75 billion from the International Monetary Fund (IMF).
“The rupee has dropped 10% on conspiracy theories like the IMF has set the condition for Pakistan to let the currency depreciate to 170 to resume the $6 billion loan programme,” he said. “Otherwise, nothing bad has happened (in the economy).”
The real effective exchange rate (REER) – the country’s cost of external trade – “is standing at a manageable level of 99 points on the index, meaning import and export pricing with our trade partners is perfect and the situation is not tense.”
He stressed the need for taking a deeper look at the widening trade deficit caused by soaring imports. “There is a need to check whether the imported goods include plant and machinery for industrialisation or they comprise luxury goods like cars or non-essential items,” he said.
“Many industrialists have imported machinery, which is good for expansion of the economy.”
At the same time, there is a need to check non-essential goods imports as well.
