Rupee likely to hold ground

KARACHI: The rupee gained some of its lost value in outgoing week against US dollar, closing the week with hopes of appreciating further on the back of $2.3 billion loan received from China, dealers said on Saturday.

The local unit touched lowest level of Rs.212 a dollar during intra-week trading by settling on Rs.211.93 on the close of trading on Wednesday.

The rupee closed the week at Rs207.48 against the dollar, slightly up as compared to closing level of Rs.208.75 of the previous week.

The domestic currency recovered significantly on Thursday when Finance Minister Miftah Ismail announced signing of loan agreement with consortium of Chinese banks for $2.3 billion, which would support country’s falling foreign exchange reserves.

Pakistan’s foreign exchange reserves kept falling for last several weeks, weighed down by huge spending on oil imports after global crude prices soared to highest level.

Country’s foreign exchange reserve dropped to $14,210.4 million, including $8,237.7 million held by State Bank of Pakistan (SBP) and commercial banks having $5,972.7 million.

SBP stated that the central bank’s reserves decreased by $748 million to $8,237.7 million mainly due to external debt repayments. The reserves are expected to increase in coming days on realisation of proceeds of Chinese Development Bank (CDB) loan.

Analysts believed that arrival of $2.3 billion from Chinese banks had positive impact on the rupee trading against the dollar, which was continuously rising the local unit.

“The Chinese loan snapped winning streak of the rupee against the dollar, otherwise the local unit currently would have lost more at the end of trading week”, they said.

Analysts are also hopeful about strength of the rupee if government was able to secure deal with International Monetary Fund (IMF) next week. They hoped that the country would be able to clinch deal with IMF to revive the stalled programme after major conditions were met by the government.

Government slapped super tax on the big industrial sector as well as burdened salaried class by revising tax rate on different slabs of personal tax to generate additional Rs400 billion under the demand of IMF to raise tax revenue target to Rs7400 billion for the next fiscal against Rs.7000 billion, it proposed at the time of presentation of budget on June 10, 2022.

Analysts expect revival of IMF programme would have a positive impact on the rupee, which remained victim of negative sentiments after the international institution remained reluctant to revive the programme on violation of agreed conditions by the country.

Pakistan is facing a financial crisis with reserves depleting fast amid stalled $6 billion IMF programme. The country is also struggling with a widening current account deficit weighed down by higher imports, and surging inflation.