Rupee remains on ropes, plunges to historic low of Rs271.35

KARACHI: The rupee continued its downward slide on Thursday after two modest sessions as the “optimism surrounding the government and International Monetary Fund (IMF) talks lost steam”.

The rupee depreciated by Rs 2.52 to settle at Rs271.35 at the close of the day. However, the local currency touched 272.17 against the dollar during the intra-day trade.

The rupee closed at Rs268.83 on Wednesday. Since the start of this year, the rupee has depreciated by 44.92.

A Capital market expert told media that reports regarding the rejection of the circular debt management plan (CDMP) presented by the government to the International Monetary Fund (IMF) had dented the market’s confidence. He said that these reports created doubts about the possibility of a bottleneck in the ongoing government-IMF talks.

An IMF mission is currently in Pakistan holding talks on the ninth review that will continue till February 9 after which a staff-level agreement is expected between the two sides.

Media reports had stated that the IMF has rejected the CDMP presented by the government and asked the authorities to raise the electricity tariff by Rs12.50 per unit in order to restrict the additional subsidy at Rs335 billion for the current fiscal year.

During the second day of technical-level talks, the Washington-based lender termed the revised CDMP as “unrealistic”, which is based on certain wrong assumptions. So the government will have to bring more changes in its policy prescription to restrict the losses of the cash-bleeding power sector.

The IMF and the Finance Ministry will work out a gap on the fiscal front after which different additional taxation measures will be finalised through the upcoming mini-budget.

The revised CDMP envisages an increase in the monster of circular debt to the tune of Rs952 billion for the current fiscal year against an earlier projection of Rs1,526 billion.

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