Rupee likely to remain stable

KARACHI: The rupee is expected to remain stable against the dollar in the coming week, drawing support from inflows from exporters with market participants anticipating lower import payments, which may help stabilise the local unit, traders and analysts said.

Pakistani currency stayed stable during the outgoing week while trading at 176 level versus the greenback. It closed at 176.74 to the dollar on the first trading day of 2022 (Tuesday) and ended at 176.67 on Friday.

“We see some support for the rupee from the improvement in the foreign exchange liquidity in the market as the exporters start selling dollars. We also expect the importer demand to remain in check in days to come,” a forex trader said. Last week, the central bank took an important step to improve supply of inflows in the market. It asked exporters to bring in proceeds within 120 days instead of 180 days. Inflows received from overseas Pakistanis through Roshan Digital Account crossed a $3 billion mark, reaching $3.16 billion as of December 31, 2021.

However, the investors were concerned about an unprecedented rise in imports and depletion in the forex reserves. The country’s trade deficit widened by a whopping 106 percent to $25.478 billion in the first half of this fiscal year owing to a significant increase in imports. Total imports jumped by 66 percent to $40.50 billion. However, exports during July-December also increased by 25 percent to $15.13 billion.

The country’s forex reserves fell to $24.02 billion as of Dec 31 from $24.27 billion a week earlier. The reserves held by the State Bank of Pakistan (SBP) declined by $169 million to $17.686 billion. The International Monetary Fund (IMF)’s approval for the resumption of its $6 billion loan programme seems to be a major trigger for the rupee in the near term as it is expected to unlock financing from the multilateral lenders and the bond issuance in the international market.

“The market awaits IMF’s nod for the disbursement of the $1 billion tranche under the extended fund facility,” said another trader.

“The market is waiting to see when the IMF executive board meets to consider Pakistan’s request for the completion of the sixth review that will pave the way for the release of the next installment,” he added.

The government said the IMF board will meet after Islamabad has met the prior conditions needed for the clearance of the sixth review. The government tabled the Finance (Supplementary) Bill and the State Bank of Pakistan (SBP) Amendment Bill, 2021 in the parliament as prior conditions imposed by the Fund for the revival of the loan facility.