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Sunday May 19, 2024

Rupee hits four-month high on export, remittance inflows

By Our Correspondent
February 29, 2024
A person can be seen counting Pakistani currency notes. — AFP/File
A person can be seen counting Pakistani currency notes. — AFP/File

KARACHI: The rupee rose to its highest level in more than four months on Wednesday, supported by strong inflows from exports and remittances, dealers said.

The rupee closed at 279.12 per dollar in the interbank market, its strongest since Oct. 20, compared with 279.27 on Tuesday. It was unchanged at 282.04 in the open market. Dealers said the rupee gained for the third consecutive day as exporters sold dollars in forward contracts and remittance inflows increased, boosting the market's dollar liquidity.

"The rupee is appreciating due to higher supply of dollars from exports and remittances, which are offsetting the import demand," said a dealer. During the current financial year, the rupee has appreciated against the dollar by Rs6.87 or 2.46 percent, while the current calendar year has seen the rupee appreciate by Rs2.74 or 0.98 percent.

The rupee's stability was briefly disrupted by the uncertainty surrounding the elections held on Feb. 8, which resulted in a hung parliament and a likely coalition government led by the Pakistan Muslim League-Nawaz.

Dealers said the International Monetary Fund (IMF) issued a statement last week of its eagerness to collaborate with the new government on policies to ensure macroeconomic stability, which helped reduce uncertainty from the currency market. In addition, dealers said investor confidence was also raised by news that China agreed to roll over Pakistan's $2 billion loan. China's roll over of debt, due on March 23, on existing terms will help maintain the country’s foreign exchange reserves.

Pakistan's foreign exchange reserves stood at $13.09 billion as of Feb. 16, according to the central bank, which is enough to cover about three months of imports. The SBP reserves clocked in at $8.01 billion.

However, the country faces high external financing needs in the near to medium term, as it has to repay about $28 billion of external debt in the next four years, according to Moody's Investors Service. The rating agency said Pakistan's credit profile reflected its "extremely high" liquidity and external vulnerability risks, stemming from its low foreign exchange reserves and limited financing options.

"While Pakistan is likely to meet its external debt obligations for the fiscal year ending June 2024, there is limited visibility regarding the sovereign’s sources of financing to meet its very high external financing needs after the current IMF Stand-By Arrangement ends in April 2024," Moody's said in its latest report.

Pakistan entered a $3 billion IMF programme in July last year to stave off a balance of payments crisis. The new government is likely to initiate fresh talks to secure a new $6 billion programme after April.