Rupee stays winning course, closes at 232.12/dollar

KARACHI: The rupee trended upwards for the fourth day, rising 0.77 percent against the dollar on Wednesday, while it is seen staying the course banking on 'Darnomics' and expected international flood aid inflows, analysts said.

The currency appreciated 1.79 rupees at the close of the trade against the dollar to 232.12, compared to its close on Tuesday of 233.91.

In the open market, the local unit gained one rupee to end at 233 versus the greenback.

Analysts are attributing the four-day rupee recovery to exporters' dollar selling, encouraged by anticipation that the rupee would regain lost ground after the appointment of new finance minister Ishaq Dar, who is a leading advocate of a stronger currency.

Dar claims that the value of the rupee is undervalued and he will seek to control inflation by lowering down the interest rates. He has also warned the speculators against manipulating the currency market.

"Proceeds from exports that exporters had been holding are suddenly coming in. The country is also expected to receive funding from the World Bank and the Asian Development Bank in the shape of aid after floods amid escalating food crisis …,” said Tahir Abbas, the head of research at Arif Habib Limited.

“The change in the finance ministry has an impact on the rupee.”

The rupee was highly likely to continue its appreciation in the future to eventually trade between the levels of 210 and 215 versus the dollar, according to Abbas.

Business leaders said the rupee appreciated and the stock market responded positively to it.

Ehsan Malik, CEO at The Pakistan Business Council, said the real challenge, however, was managing both the global perception and the reality of a challenged Pakistan economy. He viewed that the bilateral, multilateral and commercial lenders needed to be assured that the economy was in good hands, even if political uncertainty continued to prevail, while the impact of the devastating floods was yet to be fully estimated.

“There are three critical tasks. First, he (Ishaq Dar) needs to find the means to revive industry affected by the import crunch to prevent mass unemployment and political unrest. Second, to negotiate space with the IMF on programme commitments that can no longer be met. Third, to secure the promised funding from friendly countries to buffer the depleting forex reserves,” Malik said.

He said together, these would stabilise the rupee, Dar’s well-known passion and priority, which he would not be able to accomplish without adequate reserves. “Beyond the immediate time horizon, he will also need to secure funds for rehabilitation and climate resilient reconstruction,” Malik added.

The “Green Marshall Plan” was yet a dream for the developing world but strong diplomatic advocacy might yet yield some benefits for Pakistan.

“Hope is not a plan. The government needs to have a comprehensive case for balance of payment and green funding,” Malik stressed.

He said the foreign minister’s trip to Washington appeared to be gaining sympathy on climate funding.

“The much talked about debt swaps only help when a country has the means to service debt. We barely have enough to meet maturing commercial bonds. A roll-over of existing debt does not result in fresh funding or addition to reserves.

The finance minister will be helped by declining global commodity costs but looming recession in the west puts our exports at risk.”

He said the fiscal account would also be under pressure with lower imports and profits, hence reduced tax revenue on the one hand and higher public expenditure/BISP, on the other. “The government’s top priority, ahead of elections, will also be to control inflation,” Malik said.