Some currency dealers have blamed the outflow of dollars to neighbouring Afghanistan as reason for the decline.
Pakistan’s rupee on Monday hit an all-time low against the US dollar as the demand for the greenback rose in the inter-bank and open markets.
The currency lost another 52 paisa or 0.31 per cent against the US dollar to close at 169.6, according to the forex dealers. It has depreciated almost 10.21 per cent since its recent peak hit on May 14, 2021.
Some currency dealers also blamed outflow of dollars to neighbouring Afghanistan where the banking system has been in disarray since US and allied troops withdrew and the Taliban took over on August 15.
“There is an outflow of US currency to Afghanistan and it puts pressure on the Pakistani rupee that is already under stress due to rising current account deficit and inflation in the country,” Malik Bostan, chairman of Forex Association of Pakistan, told Khaleej Times.
Pakistan’s current account deficit widened to $1.5 billion in August 2021 mainly due to a spike in import payments.
“The current account deficit rose to $1.5 billion in August 2021 from $0.8 billion in the previous month, while SBP’s foreign reserves rose to an all-time high of $20 billion,” the central bank said on its official Twitter handle.
The cumulative current account deficit for the first two months — July and August — of current fiscal year 2021-22 was recorded at $2.29 billion compared to a surplus of $838 million in the same period of last year.
Last week, the US dollar hit a previous high of 168.94 versus the rupee, shattering investors’ confidence in the unit and exchange rate stability. The State Bank of Pakistan earlier indicated that the dollar may appreciate during the financial year 2021-22 due to an expected higher current account deficit.
Samiullah Tariq, head of research and development at Pakistan Kuwait Investment Company (Private) Limited, attributed the decline in the Pak rupee to the country’s high current account deficit in the past four months and said demand for dollars is higher than supply in the market.
“The rupee is likely to remain under pressure against the US dollar and other major currencies such as the UK pound sterling, single European currency euro and the UAE dirham,” he said.
“Around 25 per cent dollars (of the total available in Pakistan’s open market) is going to Afghanistan from Peshawar,” Bostan told private news channel Hum News.
“Before the Taliban takeover of Kabul, every 15 days, US planes used to bring in $500 million to Afghanistan. Around $5-6 million used to flow into the Pakistani market on a daily basis that has ended now with the US pullout,” he said.