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KARACHI: Rupee’s value in the currency market is reflective of its true position, experts and bankers said here on Saturday suggesting that there was no need for the government to further devalue the local currency.
They said that the currency market was relatively un-moved from the frequent reports of International Monetary Fund (IMF) suggesting the government to further devalue the local currency and voicing its concerns on declining foreign exchange reserves of the country.
Representatives from the State Bank of Pakistan (SBP) are expected to meet currency dealers next week to discuss the exchange rate position. “A meeting with SBP over exchange rate is expected by Monday to discuss the current situation following the sharp decline in foreign exchange reserves of the country and widening fiscal deficit,” said Zaffar Paracha, general secretary of Exchange Companies Association of Pakistan (ECAP).
He said that the appreciation in dollar has not resulted in a panic in the market unlike in July when rupee devalued by 5 per cent pricing the dollar over Rs128 in the inter-bank and about Rs134 in the open market.
However, after general elections, dollar fell back sharply to around Rs121 in the inter-bank reaching Rs111-113 in the open market with negligible demand for the greenback.
The dollar has been on an appreciating trend reaching Rs124.30 in the interbank market on Oct 5, with rates in the open market reaching Rs127.80 on Saturday.
He warned that an immediate devaluation could result in market disequilibrium similar to earlier instances when banks were offering high price of dollars and open market trading was much below the official rates.
“The banks’ exchange rates are generally regulated by SBP but the open market offers a truer picture of the exchange rate,” said a senior banker who deals with the currency market adding that the dollarisation has also stopped.
The SBP’s latest report shows that dollar holdings of commercial banks also decreased during the week ending Sept 28. The dollar reserves with commercial banks have fallen by $195 million down to $6.484 billion since July.
“Individuals looking to buy large amount of dollars to send their ill-gotten wealth abroad are in trouble, so there hasn’t been a surge in buying, no panic in the market and no dollarisation at the moment,” despite multiple calls for devaluation from IMF said Mr. Paracha.
Published in Dawn, October 7th, 2018
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Comments (37) Closed
Oct 07, 2018 08:47am
People who are paid on commission will only say what benefits their commission.
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Oct 07, 2018 09:00am
The currency exchange rate us determined by its liquidity, if supply is enough to fulfil demand in near future. The currency should remain stable, but with adding extreme foreign debt you invite periods of extreme volatility. Since the repayment amounts are increasing exponentially sooner or later the whole financial system will implode.
Had it not been for the unusually large amount of foreign remittances from gulf countries, Pakistani economy would have collapsed long ago. The increasing conflicts in gulf countries is going to hurt that forex stream in the future, Pakistan needs to prepare for that today.
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Oct 07, 2018 10:14am
Too early to say...wait till PTI's final strategy...
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Oct 07, 2018 10:51am
Calculate the portion of depleted $630 million used for debt payment and portion used to stabilize PKR in the market in the last week. Statements do not fix value of rulee. More hide and seek more wastage of time to reach IMF .
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Oct 07, 2018 11:45am
I reckon it is a good idea to let market forces to determine the exchange rate.Government interventions at the behest of IMF are totally uncalled for.However, government must keep an eye on bank transactions and large purchases of dollars from open market to curb out flow of dollars.This will dampen the demand and stabilize the currency market.
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Oct 07, 2018 11:48am
Hasn't the IMF forgotten the "free market" principles wherein, the market decides everything including the value of the local currency vis-a-vis other currencies of the world including the U.S. dollar?
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Oct 07, 2018 12:29pm
Listening to IMF would lead to a serious disaster especially if the exchange rate is set, it will see a further free fall, making imports more expensive.. under the prevailing financial crisis we cannot compete in the open market it will further worsen the situation
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Oct 07, 2018 12:36pm
Traders, bankers have not provided logic! Pakistan exports are unviable if energy bills shoot up as they are inevitable, then for exports dollar shd be around 140 mark. Or keep energy prices stable gas has already breached its highest ever.
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Oct 07, 2018 02:10pm
Those who have ill-wealth have already converted much of their wealth in dollars, pounds, etc.
Small traders worth tens of millions of rupees have also done so then how can we stop or even catch our corrupt bureaucrats, judges, military-folks, politicians, and, other people?
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Oct 07, 2018 02:40pm
@Dr. Salaria, Aamir Ahmad who knows more IMF or SBP? And who knows less?
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Oct 07, 2018 02:49pm
So shouldn't a poor man buy dollars as future investment?
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Oct 07, 2018 02:49pm
Pakistani exports are already low and now Indian rupee has fallen 15%.This means Pakistan exports have become 15% costlier than India , If PKR doesn't drop 15% Indian exports will replace so Pakistans.
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Oct 07, 2018 02:52pm
I would like to ask that so called "senior banker", is the open mkt exchange rate also not regulated by SBP to a very large extent? Furthermore if the Ruppee is correctly valued then why is it that there is shortage of liquidity in the inter bank mkt? Furthermore if the Ruppee is correctly valued, then why is it that SBP has disallowed banks from making import payments of more than $1mio without seeking its approval first and then also making the payment in next value day instead of same day?
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Oct 07, 2018 03:02pm
If you want to increase exports then devalue it. But only if you are exporting finished goods that is. Devaluating currency in order to export unfinished goods will not benefit everyone
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Oct 07, 2018 03:19pm
The rate will be 145 soon as PTI has agreed to go back to the IMF. People should buy as much dollars as possible and sell at the peak to become rich quickly.
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Oct 07, 2018 03:47pm
It does not reflect the true value of the two currencies. A dollar will buy a meal for four here, it won't buy a single ride on the New York subway.
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Oct 07, 2018 04:38pm
Current exchange rate presents the true value of rupee, say, dealers.. any data to back it up or to prove the claims... no idea what his assessment is based upon...
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Oct 07, 2018 05:44pm
Let market determine the rate. As governance betters, exports increase, the rupee will appreciate.
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Oct 07, 2018 06:59pm
PML-N and PPP both have looted Pakistan and the same supporters who got them elected. So much damage Nawaz and Zardari has caused to our country. There should be a comprehensive accountability of their assets and their relationships and friends involved. They all should be on ECL.
Don't know if PTI is bold enough to take this step?
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Oct 07, 2018 07:29pm
Currency rate manipulation is the best route to riches of the government's financial experts.
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Oct 07, 2018 07:47pm
A free float of the dollar works best where there is economic and political stability. If these two conditions are not present than market forces do not control the rates and uncertainty and concern for the future take over.
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Oct 07, 2018 08:30pm
@Sarfaraz - agree with you Sarfaraz - Govt need to take action; sooner than later ; else - economy would collapse very soon. Govt should avoid getting addicted to Non-Resident Pakistan's hard earned money.
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Oct 07, 2018 08:34pm
@Dr. Salaria, Aamir Ahmad have u forgotten loans are to be paid back,. Which is being taken out from reserves instead of, from the free markets
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Oct 07, 2018 08:55pm
As a non resident Indian; I would like to add my two cents that Pakistan is not yet ready for a free float. Pakistan may have no choice but to go to IMF in near future and by all means accept the terms of IMF including a devaluation but accepting free float in current situation may probably turn out to be a recipe for disaster. This is because unless and until; Pakistan's exports are reestablished along with strengthening of local GNP ; the trade deficit and imbalance of payments may escalate the deficit so negatively that Pakistan could face free slide of currency and Rs 150-170 or in a worst case scenario one could be looking at Pakistani Rs. 200 to a dollar. Pakistan may have to negotiate very hard with IMF and it won't be easy but the last thing to do would be accepting the condition of Free Float". Pakistan is not ready yet and should allow for the new economic measures to be implemented by new government take into effect and that is the hope but no choice.
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Oct 07, 2018 08:58pm
The question is that if the Pak Rs. is correctly valued against dollar, then why our state bank is jittery of not allowing free float by letting market forces to take aleadindeterminingits true value. The pressure on Rs. has been built up mainly due to falling FE reserves to a red line by $800 million drop early this year followed by another $345 million due to debt payments. The economy is in straightjacket due to rising fiscal & current account deficits & likely to remain so unless $12B required,not made available through external borrowings.Other than that the market forces shall keep building up pressure on our weak rupee. It will be no surprise that with our govt.’s dilly dallying in approaching IMF, after miserably failing to raise required capital from KSA/China, Pak rupee may dip further & find its parity of 150 Rs.to a $ by the end of the year. Considering negative fallout of this scenario, causing a huge jump in already skyrocketing inflation can cause discontent among people
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Oct 07, 2018 09:18pm
These guys are not giving any solid data. Right now it seems Pak rupee value is around 150 to a dollar. If funds from IMF or others are not arranged in next month or so then currency cab be on free fall with no base.
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Oct 07, 2018 09:53pm
@Ahmed Comparison worthless.Unskilled or semiskilled worker earns $15 per hour. How much does Pakistani worker earns in Pakistan per hour?
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Oct 07, 2018 10:10pm
The true value of pak rupee is 165 to a dollar.
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Oct 07, 2018 11:45pm
@TruthSayer the comparison relates to the purchasing power of a dollar against it's equivalent in rupees. Nothing to do with the earnings per hour in dollars or rupees.
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Oct 08, 2018 12:58am
Let the market forces determine the value of your currency. Artificially keeping the value stable will only bring issues in the long run and considering short sighted government and trading policies, only weakens competitiveness in the global market
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Oct 08, 2018 02:41am
@Dr. Salaria, Aamir Ahmad "Hasn't the IMF forgotten the "free market" principles"
Well, Dr . Free markets let entities go bankrupt. Do you want Pakistan to go that roue?
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Oct 08, 2018 02:44am
When I left Karachi in the first week of March 2018, the exchange rate was Rs.104 to the US dollar.
On my return on October 6, exactly after 7 months, the rate has skyrocket to Rs.127, a phenomenal rise of 22%.
Can a country progress in such an environment?
Austerity is the only solution. Stop importing the luxury items, reduce the defense spending (No nation is interesting in taking over a bankrupt country and its hostile population, if they do it will be their demise).
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Oct 08, 2018 02:46am
@GK .PTI has no strategy, they know only U-TURNS.
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Oct 08, 2018 03:21am
Stop the transfer of dollars to Dubai , and money laundering, that will help economy
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Oct 08, 2018 07:27pm
then why one was unable to find a small amount of dollars in Market just few days ago. Now it is selling around 129.
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Oct 09, 2018 10:41pm
PKR is likely to be trading around 150-160 to the US $. If you are trying to buy properties in pakistan or send money, delay for 6 months, you will get 20 percent more rupees for your hard earned foreign currency!!
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Oct 10, 2018 06:21am
@RAJA CHILL Indian exports are typically cheaper then Pakistani ones.Pakistan makes up for it by having higher quality
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