Rupee to remain under pressure

October 24, 2021

KARACHI: Rupee is likely to stretch rout to the next week mostly because Pakistan and International Monetary Fund are yet to find a sweet spot that works for both sides amid mounting import payment...

Share Next Story >>>

KARACHI: Rupee is likely to stretch rout to the next week mostly because Pakistan and International Monetary Fund (IMF) are yet to find a sweet spot that works for both sides amid mounting import payment pressure, dealers said.

Local unit shed over Rs2.80 against greenback in the outgoing week compared to the last owing to high dollar demand from importers and uncertainty over resumption of IMF’s $6 billion loan facility to Pakistan. Rupee, which had closed at Rs171.18 in the interbank at the end of trading on October 15, 2021, settled at Rs174.00 against dollar at the end of trading on Friday of this week.

“Rupee is expected to remain under pressure if IMF-Pakistan talks remained inconclusive,” traders forecast, as they believed, the massive depreciation of rupee against dollar was also caused by the panic buying and forward booking by the importers because of fears of a possible failure of IMF-Pakistan talks.

Traders also held higher imports coupled with rising commodity prices in the international markets responsible for strengthening dollar against rupee.

The international crude oil prices are hovering above $85/barrel, which have been making imports of petroleum products for domestic needs pricier.

“Costly imports of petroleum, coal, and palm oil are adding mainly to the expensive imports of the country”, Zafar Paracha, General Secretary Exchange Companies Association of Pakistan (ECAP) said.

He pointed out that apart from the dollar demand by the importers, the panic selling and forward booking of dollar also contributed to the rupee depreciation against greenback in the week.

Paracha noted that panic selling and forward booking was done by the importers because of stalled IMF-Pakistan talks whose outcome was yet a mystery.

“Imports are also becoming costly due to increasing freight charges of shipping companies as these are constantly going up and mounting pressure on the exchange rate.”

About the dollar-rupee parity in the coming week, Paracha said that it depended on the outcome of talks with IMF.

“If there is no condition calling for depreciation of rupee against dollar for the resumption of IMF programme then dollar may recover as we witnessed in the past when it fell to Rs153 after rising to Rs169.”

The ECAP official appreciated State Bank of Pakistan (SBP)’s policy on exchange rate; however pointed out that central bank and the government didn’t seem to be on the same page on exchange rate, which was also adding to the woes of local currency.

Pakistan’s foreign exchange reserves dropped to $24.327 billion in the week ended October 15 from $25.969 billion a week ago due to foreign debt repayment.

The SBP-held reserves decreased $1.646 billion to $17.492 billion mainly due to external debt repayment that included repayment of $1 billion against Pakistan International Sukuk. The reserves held by commercial banks, however rose to $6.835 billion from $6.831 billion.



More From Business