KARACHI: Despite support from the International Monetary Fund and the Asian Development Bank worth billions of dollars, the local currency has lost 2.8 per cent against the dollar in June.

The dollar hit an intraday high of Rs167.80 in the interbank and finally closed at Rs167.65 on Tuesday, posting a jump of Rs1.07 compared to the opening value.

During this month, the dollar has gained Rs4.55 or 2.8pc. The weak currency usually supports exports but demand in the international market has drastically shrunk due to Covid-19.

Forex Association of Pakistan President Malik Bostan said low remittances, falling exports and higher demand for the dollar have collectively hit the exchange rate.

According to him, the open market sold dollars at Rs167.80 but there was no extra demand, adding that most of the liquidity there is being deposited in the banks.

Bankers believe that due to the recent shortage of petroleum products in the country, the government-owned company and private sector rushed to import fuel.

“I am not sure which sector is buying more dollars but we believe the crude oil import has suddenly increased its demand to buy higher quantities of petroleum products,” said a currency dealer.

“One of the major reasons behind the quick appreciation of the dollar is the sharp decline of over 55 per cent in exports during 10MFY20, giving no hope for improvement in the situation,” said a senior banker.

Currency dealers were also making speculations about the loss of jobs in the oil-based Gulf countries which would ultimately hit the inflow of dollars from the region that accounts for about 65pc of the total remittances to Pakistan.

Remittances have remained intact so far in the first 11 months of FY20 but the currency market was sure that the impact would be serious by the next fiscal year. The government has yet not come out with any figures about the loss of jobs faced by overseas Pakistanis in the Middle East.

“One thing is sure that no more Pakistanis are going for jobs in the Arab states,” said a senior banker. Since the emergence of coronavirus, it has become difficult for skilled and unskilled workers to get jobs anywhere including the Middle East.

The State Bank of Pakistan’s reserves fell by almost $2 billion to $10.1bn between May 21 and June 12 (21 days), reflecting the weakening foreign exchange buffer. Meanwhile, the government has succeeded in getting debt repayment relief for one year from the G20.

Bankers said Pakistan has been borrowing from commercial banks despite support given by the IMF and ADB to fight against the coronavirus.

“We have a chance to export orders which are on hold but finding new ones would be extremely difficult,” said Aamir Aziz, an exporter of readymade garments to Europe.

Published in Dawn, June 24th, 2020