The Pakistani rupee has hit a new low against the US dollar for the fifth time in 10 months after falling around 10% in the interbank market on Tuesday. The US dollar closed at Rs 133.6 by the end of the day’s trading having touched Rs 138 at midday.

In a statement, the State Bank of Pakistan underscored that rising oil imports and the increase in global oil prices had put pressure on the country’s foreign reserves.

“The State Bank is of the view that this adjustment in the exchange rate along with [a] lagged impact of the recent hikes in the policy rate and other policy measures to contain imports will correct the imbalances in the external account,” it said.

The rupee hovered around the 104-105 mark against the dollar for the most of the previous government’s time in office, but fell in December to Rs 110.5, while then finance minister Ishaq Dar was fighting corruption charges.

With the central bank cutting the artificial support that had held the rupee afloat in March, it fell another 4.4% to Rs 115.5 against the dollar. A balance of payment crisis resulted in further slumps in June and July, taking the currency to Rs 125 against the dollar, before this week’s fall. Last month, central bank reserves shrunk to $9 billion, which is just two months’ worth of imports.

Experts have long maintained that given the shrinking foreign exchange reserves, a current account deficit touching $18 billion, and a budget deficit of over Rs 2 trillion ($7.8 billion), Pakistan has little choice but to seek its 13th International Monetary Fund (IMF) bailout. However, the new Pakistan Tehrik-e-Insaf (PTI) government tried to seek alternatives, wanting to live up to its pre-election slogan of “breaking the begging bowl”.

Officials who spoke to Asia Times confirmed that Pakistan sought loans from both China and Saudi Arabia, during Chinese Foreign Minister Wang Yi’s visit to Islamabad, and Prime Minister Imran Khan’s trip to Riyadh last month.

Devaluation criticized

Meanwhile, Financial Ministry officials said the rupee price adjustment has been done in accordance with the IMF’s conditions for a bailout. “The re-evaluation of the Pakistani rupee is among the prerequisites of the IMF bailout shared by the negotiating team that visited Islamabad,” a senior Finance Ministry official said.

Even so, analysts have strongly criticized the manner in which the currency’s value has been adjusted.

“The previous two [rupee revaluations] were both misplaced should’ve been taken as part of the fund program. Now we have the third straight re-adjustment in that series. This is not how price adjustment is supposed to take place, there should be a gradual process,” former finance secretary Waqar Masood Khan said.

“It’s still unclear if this decision is taken as a prior action basis or an ad hoc action. We don’t know that when we go to the Fund for the program what the outcome will be afterward.”

Economist and political scientist Farrukh Saleem, who was appointed this week by the government as its spokesperson on economic and energy affairs, said undoing the artificial rupee price was long overdue.

“State Bank reserves were only $17-18 billion in February 2017. It was Ishaq Dar’s stubbornness that didn’t allow the rupee’s rate to fall, and he threw $7-8 billion dollars in the market for it. He hired his own people in the State Bank to get artificial stability,” Saleem said.

IMF bailout ‘will be tough initially’

But Saleem was critical of the government’s claims there may have been alternatives to the IMF bailout. “I’m not out here to defend something wrong. I have been writing and saying for the past two months that going to the IMF was inevitable,” he said.

Waqar Masood Khan says the government wasted precious time. “If they seriously thought there were other options, I can only sympathize with them,” he said. He was also skeptical that the oil market influenced the rupee price. “How do you know that it was reflective of the markets? If there was pressure it should’ve been building up step by step.”

However, Saleem said there was truth in the central bank’s assertion. “The PML-N was fortunate that the Brent crude prices fell from over 100 to 28 [dollars per barrel] during their tenure. Now the prices have increased to 80-85 [dollars per barrel]. I feel once the sanctions on Iran kick in next month, prices will increase further,” he said.

Analysts predict that the immediate impact of the depreciation and the IMF package will be hard. Before the previous IMF bailout during the PML-N government, Asad Umar, who is now Finance minister, said the package would “cost the country 1.2 million jobs”.

Saleem conceded that a negative impact was inevitable. “Prices will rise, beginning with fuel, which in turn increases the cost for everything. The stock market has crashed, our bonds have become more volatile [and] the debt burden will increase once you convert it into rupees,” he said.

But, he underscored the long-term benefits. “We need both the money and the market confidence. As we enter an IMF program the market will start to stabilize. Every dollar the IMF gives us can get us two to three dollars from other organizations. So it’s a letter of comfort that works in the World Bank, the Asian Development Bank and the Islamic Development Bank.”