KARACHI: After three days of stability in the exchange rate, importers released their products in the market that they had been holding back for a week.

The dollar was traded in the range of Rs110.20-110.50 in the interbank market during the last session on Friday.

The rupee started losing value against the dollar on Dec 8. It lost about 4.7 per cent during the week. Currency dealers said the State Bank of Pakistan (SBP) used its influence to bring imported dollars in the open market. Some dealers export currencies other than the greenback to Dubai and bring back dollars instead. However, these importers withheld their imported stocks in the wake of rising dollar prices.

“The dollar is easily available in the open market. Its demand on Friday was not more than 50pc of what it was two days back,” said Mailk Bostan, president of the Forex Association of Pakistan.

He said half of the dollar amount in the open market is being deposited in banks by currency dealers, which indicates low demand. The depreciation hurt importers who said prices of imported products inflated after the 5pc loss in the value of the local currency.

“We have to make payments at the rate on the day that the imported products land in the country. Landed costs automatically increased, but we cannot pass on the hike to retailers with immediate effect,” said Anis Majeed, an importer of pulses.

Wholesalers who had paid before the depreciation took place had the opportunity to earn an additional 5pc on their imports.

“I don’t believe the costlier dollar will cut imports. People will buy same products at 5pc higher rate,” he said, adding that exporters could benefit in the short run as buyers would adjust price differences due to the change in the exchange rate.

Ever-increasing imports have created a serious problem for the country’s external sector. The trade deficit increased more than export proceeds, producing a large current account deficit. The International Monetary Fund and other economic institutions recently criticised the growing current account deficit.

Exporters welcomed the depreciation. But a number of economists questioned the extent of the likely increase in exports and decrease in imports as a direct result of the depreciation.

Bankers like the National Bank’s president recently wondered aloud about “other options” if exports failed to boost following the depreciation. More depreciation is not an option, he said, adding that other problems afflicting the export sector must be addressed.

Published in Dawn, December 16th, 2017