Rupee remains essentially unchanged on tepid demand for US dollar

KARACHI: The Pakistan rupee Monday remained essentially unchanged due to tepid demand for the greenback in the interbank market.

Data released by the State Bank of Pakistan (SBP) showed the rupee closed today's session at 221.69 against the dollar, down -0.02% from Friday's close of 221.64.

Currency dealers are not upbeat about a strong recovery until foreign exchange reserves are replenished.

Analysts said it was a result of negative sentiment that was fanned by the shrinking dollar stash of the country.

“Traders are perplexed because of an erosion in foreign exchange reserves, bringing the rupee under pressure,” a money dealer said.

SBP's foreign exchange reserves saw a massive erosion of $956 million, falling to $7.96 billion, dented by debt payments, central bank data showed last week.

Total liquid foreign reserves held by the country stood at $13.72 billion. Net foreign reserves held by commercial banks clocked in at $5.76 billion after a reduction of $2 million.

“During the week ended on November 4, 2022, SBP’s reserves decreased by $956 million to $7,957.0 million due to external debt servicing,” said the SBP in a statement.

This leaves the country with an import cover for 1.16 months only.

“Major external debt repayments executed during the week include repayment of government’s commercial loans,” it said.

The SBP further said that refinancing of these loans was in the process which would improve foreign exchange reserves in the coming weeks”.

The reserves are crucial for the country amid the current situation, where it has to also import edibles after the cataclysmic floods devastated the agricultural crops and dealt damages estimated at over $30 billion.

The country is expected to receive inflows from bilateral and multilateral lenders, which will not only help meet the debt obligations but also improve foreign exchange reserves and ease pressure on the rupee.

China and Saudi Arabia have given assurances to Pakistan for providing a financial package of $13 billion. Saudi Arabia’s Crown Prince Mohammed bin Salman is scheduled to visit Pakistan this month during which Islamabad hopes to get a $4.2 billion bailout package from Riyadh.