Pakistan's currency continued its dramatic downward spiral for the third straight day, plummeting to a record low of 270 against the US dollar, as the government surrendered its control over the exchange rate to meet demands of the International Monetary Fund, or IMF, for a bailout. The cash-strapped nation is in desperate need of monetary aide to tide over the economic crisis.
The currency was devalued by 7.50 PKR (or 2.77%) to a new all-time low at 270.10 PKR against the US dollar on the third consecutive day of free-fall, The Express Tribune reported.
Cumulatively, it has slumped by 39.21 PKR (or 14.50%) in the three days to date compared to Wednesday's close at 230.89 PKR.
High demand and low supply of the greenback in the economy is causing this depreciation, experts say.
"The wide gap between demand and supply of the greenback in the system pushed importers to pay 270 PKR per dollar," KASB Securities Head of Research Yousuf Rahman told The Express Tribune.
The Pakistani rupee depreciated sharply after the government removed an unofficial cap on the USD-PKR exchange rate to revive the stalled International Monetary Fund (IMF) loan programme.
Pakistan needs to complete the ninth review of a $7 billion IMF programme that would not only lead to a disbursement of $1.2 billion, but also unlock inflows from friendly countries and other multilateral lenders.
Amid chaos in the markets, Pakistan also announced a 35 rupees increase in the prices of petrol and diesel on Sunday. Prices of kerosene oil and light diesel oil have also been increased by 18 rupees, Pakistan Finance Minister Ishaq Dar announced in a televised address, 10 minutes before the increased prices came into effect.
Finance Minister Ishaq Dar said that despite international prices and rupee devaluation, "on directions of Prime Minister Shehbaz Sharif, we have decided to increase the minimum price of these four products," Dawn newspaper reported.
The price hike was done based on the recommendation of the oil and gas regulatory authority. "They said there were reports of artificial shortages and hoarding of fuel in anticipation of price rises - hence this price rise is being done immediately to combat this," the Finance Minister said.
Steps to meet the IMF conditions include increasing fuel and energy prices, and raising taxes further, which, along with the present currency slump, may worsen inflation.
