Fitch Ratings on Thursday revised its forecast for the Pakistani rupee and forecast an average rate of 180 in 2022, compared to its previous forecast of 165, due to various factors including increased inflow of the US dollar into Afghanistan.
New York City Forecast agency – One of the three leading global rating agencies – for the rupee’s average rate this year now stands at Rs 164 against the US dollar from Rs 158 earlier.
A day earlier, the shares had fallen by about 3 percent, while the rupee fell. record low At Rs 170.27, as investors feared a US Senate Bill The Afghan which is demanding a ban on the Taliban can be extended to Pakistan.
Rupee, which is called worst performing currency In Asia, this seems to have opened up territory for the US dollar to move rapidly further uncontrollably and destroy the remaining value of the local currency.
In the domestic market also, the purchasing power of money is decreasing rapidly, due to which the general public is also facing the cost of inflation affecting badly.
On August 26, 2020, the dollar reached Rs 168.43. Then it started declining and reached Rs 151.83 on May 14, 2021. However, the greenback started growing and has grown by 6.6 per cent and 9.9 per cent since June and May 14, 2021, respectively.
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The State Bank of Pakistan (SBP) had earlier indicated that the dollar could rise in value during the current fiscal, as a current account deficit is expected.
Now in its projections for 2022, Fitch expects an average rate of 180 versus the previous forecast of 165.
“Our expectation of further weakening of the currency is based on deteriorating trade terms in Pakistan, tighter US monetary policy, US dollar flows from Pakistan and into Afghanistan,” it said.
Analysts say the rupee has been hit by persistently high demand for the dollar due to the country’s current account deficit, while the pressure in the Afghan situation is building up.
Fitch said that in the long term, tightening US monetary policy along with higher structural inflation compared to the United States will weaken the rupee against the dollar.
However, it said devaluation of the rupee based on the actual effective exchange rate would limit the extreme weakness in the currency.