Wednesday July 06, 2022

Rupee racks up highest single-day gain

The rupee rose 2.27 percent to close at 207.23 per dollar in the interbank market after it ended at 211.93 on Wednesday

By Erum Zaidi & News Desk
June 24, 2022
Photo: The News/File
Photo: The News/File

KARACHI: Pakistan’s currency gained 4.70 rupees against the dollar on Thursday in its highest-ever one-day rise pushed by approval of a $2.3 billion loan by China to stabilise the country’s foreign exchange reserves and on hopes for the revival of the IMF bailout package after Islamabad and the multilateral lender have agreed on the FY2022/23 budget.

The rupee rose 2.27 percent to close at 207.23 per dollar in the interbank market. It ended at 211.93 on Wednesday. The local unit bounced back after it lost 5.39 percent in the last nine sessions.

In the open market, the local unit gained three rupees to end at 209 per dollar. “The improvement in the market sentiment, supported by expectations for the unlocking of external funding from the IMF and other bilateral and multilateral sources and friendly countries, and fall in global oil prices, helped the rupee to seethe largest single-day gain ever,” said a forex trader.

Previously, the domestic currency posted the highest ever recovery of four rupees in June 2019. “The market is in a bullish mood since the news regarding the rollover facility by China to Pakistan came in. Finance Minister Miftah Ismail also said Pakistan will receive such inflows tomorrow,” the trader added.

Exporters have also started selling dollars in the market in anticipation of further rebound in the rupee in days ahead, according to traders.

“Market sentiment has changed from extreme negative to slight positive, whereas a staff level agreement and knowledge of what are IMF's 'prior actions' may lead it to extreme positive," said Komal Mansoor, the head of research at Tresmark.

Data from the State Bank of Pakistan (SBP) showed on Thursday that the central bank’s foreign exchange reserves plunged to their lowest level in 32 months at $8.2 billion as of June 17, from $8.99 billion a week earlier. The SPB reserves fell by $748 million or 8.3 percent on a week-on-week basis.

Pakistan’s forex reserves dropped 4.9 percent to $14.2 billion from $14.9 billion previously, while those held by commercial banks inched up 0.3 percent to $6.0 billion. The country’s reserves are also at their lowest since January 2019. The reserves available with the SBP are enough to cover 1.21 months imports. The latest forex reserves numbers came as the country is facing a financial crisis with the reserves depleting fast amid a stalled $6 billion International Monetary Fund programme. The country is also struggling with a widening current account deficit weighed down by higher imports, and surging inflation.

The SBP attributed a decline in the reserves to the external debt repayments. However, it tried to comfort the market by expecting a stabilisation in reserves due to potential Chinese inflows. “SBP reserves are expected to increase in coming days on realization of proceeds of CDB [China Development Bank] loan,” it said in a statement. The total liquid foreign reserves held by the country stood at US$14,210.4 million as of 17-Jun-2022.

Agencies add from Islamabad: Addressing a press conference along with Minster for Information and Broadcasting Marriyum Aurangzeb, Minister for Finance and Revenue Miftah Ismail said that if oil prices fall internationally, the government will do whatever possible, Geo News reported. He said former prime minister Imran Khan left the country on the brink of bankruptcy and we have saved the country from default.

“We are levying taxes on the rich so that we should not beg from others. We will overpower difficulties within two to three months. Imran Khan breached the agreement with the IMF, which escalated the inflation," he said.

He said: “We have not shifted the burden of taxes on the poor segments of the society. We have jacked up tax on sugar mills. We are slapping taxes on the rich people. Tax was meant for only poor people in Pakistan but have slapped tax on the companies of sons of prime minister. More tax will be slapped on my own company too.”

He indicated one per cent more tax will be imposed on those having income more than Rs150 million, two per cent tax on income of more than Rs200 million; three per cent on income of more than Rs250 million, and four per cent on more than Rs300 million. “With imposition of new taxes, the amount of tax to be imposed on my company will increase at least Rs200 million to Rs250 million,” he said. "I will close the budget by making a speech in National Assembly," he indicated.

Headway has been made on agreement with IMF, he said. China too has signed an agreement of 2.3 billion dollars. The money will be received till Monday.

When the PTI government had come, then the debt stood at $25,000 billion and when they left the government, the debt had soared to $45,000 billion. How can you talk of sovereignty when you obtain loans at such a large scale. Imran Khan should tell us as to why he was going to turn Pakistan into a Sri Lanka. He remarked Prime Minister Mian Shehbaz Sharif is providing relief to 80 million people. Mobile units of Utility Stores will provide commodities to the people at their doorstep at subsidised rates.Separately, talking to the Charge d' Affaires of the Embassy of People's Republic of China, Ms Pangchunxue, who called on the federal minister here, Miftah Ismail said the China Pakistan Economic Corridor (CPEC) would play an important role in taking Pakistan’s economy forward as well as cementing the bilateral relationship between China and Pakistan.

Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha was also present in the meeting, the statement added.

Miftah Ismail affirmed full support and cooperation to Chinese investors and businessmen. The Chinese Charge d' Affaires assured full support and cooperation of Chinese government and said that China was committed to developing the CPEC projects under the vision of shared prosperity and it would further strengthen and expand economic cooperation between both the countries. Both the dignitaries vowed for further enhancing the bilateral cooperation in various fields.