Bankers believe low demand for dollars and improved inflows have stabilised the exchange rate parity.
Bankers believe low demand for dollars and improved inflows have stabilised the exchange rate parity.

KARACHI: The dollar fell to a five-month low against the rupee as it traded at Rs162.80 in the interbank market on Thursday.

Currency dealers in banks said the dollar was traded as low as Rs162.70 intraday while the SBP reported closing rate of Rs162.86. The greenback lost around 60 paisas during the day.

During the last five months, the dollar touched its highest rate on August 27, hitting Rs168.43 and then began fluctuating between Rs165 and Rs166. Since then, the greenback has lost about Rs5.57.

However, with the improvement in inflows and rising exchange reserves stabilised the rupee-dollar parity. Bankers dealing with the currency market said the major reason for the devaluation of the greenback against the rupee was low demand.

The government has managed to cut down imports drastically during the two years and bring down the current account deficit from $20bn in FY18 to surplus in the first quarter of FY21.

Improvement in the foreign exchange reserves was also due to financial support of friendly countries and commercial borrowings from international banks.

Inflows through both remittances and foreign direct investment have remained high since the beginning of FY21. The dollar was trading at Rs163.40 in the open market while demand was extremely low.

Reserves fall

The State Bank of Pakistan paid over half a billion dollars as payment against foreign debts which brought down the country’s overall foreign reserves.

The SBP made external debt repayment of $507 million during the week ended on October 9, after serving $580m in the period ended on October 2.

As a result, foreign exchange reserves of the SBP decreased by $356m to $11.798bn by October 9.

Total liquid reserves of the country were $19.015bn while holdings of the commercial banks stood at $7.217bn.

However, Pakistan is expected get some relief on the debt repayments front after the G20 on Wednesday agreed to a six-month extension until June 2021 for the Debt Service Suspension Initiative.

Meanwhile, Prime Minister Imran Khan on Thursday tweeted that the State Bank of Pakistan has opened more than 21,000 digital accounts under the Roshan Digital Account.

“Glad to see Overseas Pakistanis taking advantage of #RoshanDigitalAccount initiative of State Bank of Pakistan. To date more than 21 thousand digital accounts have been opened remotely & $24 mn received. Number of accounts & amounts are growing everyday,” tweeted PM Khan.

Published in Dawn, October 16th, 2020