ISLAMABAD   -  The Pakistani rupee plunged to an all-time low on Thursday against the US dollar, a day after a similar historic dip on Wednesday prompted the government to form a committee to control the unprecedented devaluation of the local currency and flight of capital.

The US dollar yesterday peaked to the highest-ever level of Rs148.5 in open market. In interbank too, dollar touched an all-time high of Rs147, showing a surge of over Rs6 in a single day, before closing at Rs146.52.

Earlier, the dollar value had gone to Rs146.25 in open market on Wednesday, which came down to Rs144 the same day after Prime Minister Imran Khan held a meeting on currency related issues. In just two days the rupee has plummeted Rs9 against the dollar.

The depreciation of local currency is worrisome because it enlarges the volume of country’s public debt, makes poor’s life more miserable by fuelling inflation, and upsets the long term business plans of all kinds of companies and industries.

The unsettling of rupee value against dollar comes just days after Islamabad sealed a $6 billion bailout package with the International Monetary Fund (IMF) in the hope of propping up the country’s slowing economy.

As part of IMF conditions for the loans, Pakistan government had agreed that it won’t intervene in the currency market and allow the market forces to determine the value of foreign currency.

Though the government admits it had given assurance to the IMF of non-intervention in market for fixing the currency value, as would be done in the past, it insists that no certain value of dollar was agreed with the international lender.

But Malik Bostan, chairman of Pakistan Forex Association, sees government’s own hand in the currency market mess. “The government has deliberately devalued the rupee against dollar to meet the IMF condition,” he alleged while talking to Anadolu Agency.

Dollar demand and market uncertainty

Experts say the market speculation caused by this agreement is the prime reason behind this free fall of the local currency. Investors are buying and hoarding dollars, believing its value would increase further in the coming days.

To check the slide of rupee, certain measures were agreed in Wednesday’s meeting, which was chaired by the prime minister and attended by the heads of country’s financial institutions as well as a deputation of the currency market leaders.

The meeting not only had agreed to maintain certain values of the major foreign currencies but also pledged to take stern action against foreign exchange companies selling the dollar at higher rates.

After dropping and closing at the agreed value of Rs144 on Wednesday, the dollar reared back its head and surged even more on the very next day.

Dollar’s going wild in the market, despite determination of benchmark value and government’s warning against foul playing, has sparked concerns that things could go further out of control.

Market sources said that dollar is not easily available in the market and the exchange companies are not in a position to provide any large amount of the US currency.

Forex Association of Pakistan President Malik Bostan told a private news channel that the rupee is expected to depreciate by a further 15 to 20 percent against the dollar by December this year. “Until the foreign exchange reserves situation improves, there is no [chance] of the dollar coming down,” he said.

Islamabad Chamber of Commerce and Industry (ICCI) also showed great concerns over the record devaluation of rupee.

ICCI President Ahmed Hassan Moughal said the rupee has already witnessed hefty depreciation against dollar due to which people were badly suffering from rising inflation while cost of doing business has gone up significantly.

He further said that over the last 12 months, rupee has shed its value by 28 percent against dollar as in May 2018 the value of rupees was around Rs115 against a dollar which has now tumbled to Rs148.

He said that business community needed a stable value of currency for long term business plans, but the sudden fall in the value of rupee has badly hurt all business plans of the private sector and frustrated their efforts for promoting their activities.

The ICCI president however lauded the prime minister for forming a committee under his finance adviser to control rupee devaluation and capital flight. He said that with quick and timely decisions, economy could be saved from further damage.

 Here’s what authorities say

After holding negotiations with Pakistan, the IMF had said, “A market-determined exchange rate will help the functioning of the financial sector and contribute to a better resource allocation in the economy. The authorities are committed to strengthening the State Bank of Pakistan’s operational independence and mandate.”

Now the Pakistani authorities are towing the same line and trying to present the rapid rupee slide as a blessing in disguise.

“This movement [of currency value] reflects demand and supply conditions in the foreign exchange market,” the chief spokesman of State Bank of Pakistan said in a statement. It will help in correcting market imbalances, he added.

Asad Umar, the former finance minister and economic wizard of ruling PTI, has said that dollar value is not increasing due to the deal with IMF. He said that dollar value was not discussed with the IMF at all when he was in the office and leading negotiations with the Fund for loan package.

Umar, who is now chairman of the National Assembly Standing Committee on Finance Revenue and Economic Affairs, said that the committee would take up the issue of rupee devaluation in its next meeting.

Minister of State for Revenue Hammad Azhar said that federal government has no role in controlling the currency value. The State Bank of Pakistan is responsible for determining the currency value, he held. He added that the prime minister had taken notice of curren