The rupee experiences further depreciation


The Pakistani currency came under renewed pressure as it suddenly depreciated by 0.5% (roughly Re1) to a two-week low of 186.63 rupees against the US dollar on Friday as no significant progress had been made. been achieved in the acquisition of new rescue plans from friendly countries.

The rupee was seen consolidating around Rs185-186 ahead of the Eid holiday on hopes that Prime Minister Shehbaz Sharif and Finance Minister Miftah Ismail would manage to acquire bailouts from friendly countries including the Saudi Arabia and the United Arab Emirates (UAE) during their visit to the two countries.

“The rupiah faced renewed pressure on lack of progress following media reports of the government acquiring new bailouts from friendly countries,” the deputy research director said. of BMA Capital, Abdul Rehman, in an interview with The Express Tribune.

The country’s foreign exchange reserves continued to deplete rapidly. They have fallen by around $7 billion (about 40%) in the last four months to reach $10.5 billion at the end of April 2022.

“Foreign currency inflows are the need of the hour to support the rupee against the greenback,” Rehman said, adding “on the contrary, we are seeing sharp outflows over the past few months.”

Reserves hit a record high of $20.14 billion in August 2021, according to central bank data.

Earlier, a national media reported that Pakistan convinced Saudi Arabia to extend an $8 billion bailout package, including the $3 billion rollover the kingdom had deposited in the Bank’s account. State of Pakistan (SBP) during the tenure of the previous PTI government. (August 2018-April 2022).

“The national currency is expected to fluctuate between Rs185 and Rs190 against the US dollar until the government succeeds in attracting new inflows from friendly countries and the International Monetary Fund,” Rehman said.

He expressed hope that the ambiguity over inflows from bilateral and multilateral sources will become clear over the next 10 days.

The real effective exchange rate (REER) – the value of the national currency against a basket of trading partner currencies – suggests that the rupee is currently hovering around its fair value (at 97 on the index).

“The rupee will recover to settle around 180 rupees against the US dollar in the medium term after the government manages to attract new inflows,” he said.

He added that the government would acquire new packages from bilateral partners in stages.

As in the first phase, the government would convince Saudi Arabia to renew its old deposits worth $3 billion in the SBP account.

“Later, the kingdom is expected to increase deposits and double the amount of the deferred payment oil supply credit line to $2.4 billion per year from the current $1.2 billion per year,” he said. he declared.

The disbursement of the next IMF tranche (about $1 billion) of the $6 billion loan program and the inflows from friendly countries would go side by side and rather coincide one after the other, he said. -he declares.

The IMF team is due to visit Pakistan in a few days to complete its sixth review of the national economy under its $6 billion (pending) lending program.

Approval of the sixth review would allow the IMF to disburse the next tranche of the loan by the end of May 2022, he said.

The Rupee also came under (renewed) pressure from a rebound in international crude oil prices above $110 a barrel.

Pakistan relies heavily on imported energy to meet domestic demand. Imports account for about 70% of the country’s overall energy needs.

“Rising global oil prices are negative for Pakistan,” said Tahir Abbas, research director of Arif Habib Limited (AHL).

The latest trade data suggests that Pakistan’s oil import bill has continued to rise due to the persistent increase in global energy prices. Otherwise, the non-energy import bill has fallen over the last two months (February-March).

The share of energy imports stands at 25% in US denomination, out of Pakistan’s total imports in the first nine months (July-March) of the current fiscal year 2021-22.

Published in The Express Tribune, May 7and2022.

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