Could Pakistani rupee drop to 80 against dirham in fresh lows?

The Pakistani rupee will remain under pressure and may hit fresh lows against the US dollars, the UAE dirham and other major currencies next week as foreign exchange reserves dropped to below $4 billion threshold, experts say.

The rupee, which shed around 14.34 per cent of its value against the greenback this week and hit all-time low of 262.60 against the US dollar (71.55 against the UAE dirham) in the interbank market on Friday, will not be able to recover its losses unless the government strikes a deal with the International Monetary Fund (IMF) team next month.

The fund's team is expected to start 10-day visit to Pakistan on January 31 to complete the ninth review of its $6 billion Extended Fund Facility (EFF) signed in 2019.

"Upon successful completion of the review, Islamabad will be able to get $1.1 billion IMF loan tranche and additional funds from other multinational lenders and friendly nations," according to the analysts and currency experts.

Pakistan is facing a severe economic crisis as the country's foreign exchange reserves dropped to a nine-year low of $3.6 billion and only enough to pay for around three weeks of imports. The South Asian nation has no other option but to resume external financing to ease pressure on its plunging currency as well as to contain rising inflation (24.5 per cent) and rationalise record interest rates (17 per cent).

Samiullah Tariq, head of Research at Pak Kuwait Investment Company, said the rupee will remain under pressure unless the government will take some concrete measures to improve economic indicators and secure external flows from the multinational donors and friendly nations.

"The IMF holds the key, and if the deal is secured next month, then it will not ease pressure on the rupee, but to help revive economy and external debt repayment as per schedule. After the IMF deal, a lot of flows in the informal market would move to formal channels," Tariq told Khaleej Times on Saturday.

The rupee has lost more than 28 per cent of its value against the US dollar during the current financial year 2022-23 so far. It shed around 16 per cent of its value in January amid political instability and weak economic indicators of the country.

On Friday, the rupee closed the week on negative note after losing 2.73 per cent of its value against the US dollar. It closed at 262.60 (71.55 against the UAE dirham) in the interbank market while it was exchanging hands at around 270 (73.56 versus the dirham).

The previous official low of 240 rupees was recorded in July 2022.

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