Rupee likely to be stable next week

KARACHI: The rupee is projected to stay stable in the coming week in hopes that the executive board of the International Monetary Fund will approve Pakistan’s new loan programme this month, dealers said.

This week, the local currency moved in narrow ranges versus the US dollar in the interbank market. On Monday, the rupee closed at 278.5 against the dollar; on Wednesday, it dropped to 278.74; and on Friday, it closed at 278.50 again.

“Because of normal dollar demand from importers and the expectation that the $7 billion Extended Fund Facility will be approved by the IMF’s board by the end of this month, as expressed by Pakistan’s Finance Minister Muhammad Aurangzeb, we believe that the rupee will remain at its current levels for the next week,” a currency dealer said.

The minister also said that a $12 billion rollover by friendly countries is anticipated.

According to dealers, the market’s abundant dollar liquidity and the positive outlook regarding the potential for a current account surplus in July have boosted market sentiment. The slight increase in foreign exchange reserves also supports the rupee.

The Pakistan Bureau of Statistics showed the country’s trade balance data on Thursday, which showed a trade deficit of $1.948 billion for July.

Pakistan’s foreign exchange reserves held by the central bank increased by $75 million to $9.1 billion as of July 26.

The current account deficit improved due to increased exports, remittances, and financial inflows, leading to the buildup of the SBP’s reserves.

According to the SBP, Pakistan’s external debt obligations would be managed comfortably and timely because of improving foreign fund inflows and manageable current account deficits.

The SBP expects that its reserves will reach $13 billion by the end of this fiscal year.

Pakistan needs to repay $24.8 billion in external debt in FY25.

The State Bank of Pakistan cut its benchmark interest rate by 100 basis points (bps) to 19.5 per cent on Monday due to easing inflation pressures and improvements in the external account.

“Looking ahead, the MPC expects a modest increase in imports, in line with the growth outlook,” said the SBP in a monetary policy statement.

“At the same time, the continued robust growth in workers’ remittances, along with an increase in exports, is expected to contain the current account deficit in the range of zero to 1.0 per cent of the GDP in FY25,” it added.

The current account deficit in FY24 narrowed significantly to 0.2 per cent of the GDP from 1.0 per cent in the preceding year.