While the inter-bank market managed to keep the dollar below the Rs300 mark, the greenback soared to a record high price of Rs315 in the open market. The dollar was traded up to Rs315 during the day, with the Exchange Companies Association of Pakistan (ECAP) reporting the buying and selling prices as Rs309 and Rs312, respectively. The desperation was evident in the open market as the average buyer was purchasing dollars without hesitation. Currency dealers mentioned that the increasing demand pushed the price so high that it crossed the limit set by the IMF.
Interestingly, the government had assured the IMF before the renewal of the Extended Fund Facility in June that the difference between the rates in the two markets would not exceed 1.25 per cent. However, the current differential stands at about five per cent.
Currency dealers argue that while the IMF discourages interference in the currency market, the demand for keeping the differential at 1.25 per cent is, paradoxically, a form of interference. The inter-bank market noted a further dollar appreciation by 63 paisa, reaching Rs299.64 compared to Rs299.01 the day before. Dealers noted the constant high demand and the backlog for clearance of previously imported containers waiting for dollars.
High Public Debt and its Implications
The escalating dollar price is becoming a significant concern for the government as it has dramatically increased the public debt. Former finance minister Ishaq Dar highlighted this issue in a tweet that the devaluation of the rupee raised the public debt by a staggering Rs 9.3 trillion in FY23. Atif Ahmed, a currency dealer in the inter-bank market, predicted, “The struggle to keep the dollar below Rs300 won’t work. Within a few days, the dollar will cross this line. This is inevitable given the pipeline’s high demand and lack of inflows.”
Experts and observers feel that economic uncertainties are intensifying, with the currency market being particularly sensitive to political shifts. Another dealer, claiming to understand policymakers’ intentions, suggested that political instability has made the general populace anxious, resulting in the “dollarisation of the economy”.
