KARACHI: The US dollar has appreciated further to set a new record while foreign exchange reserves of the State Bank of Pakistan (SBP) have been declining on a weekly basis.

The dollar closed at Rs176.42 on Thursday as it gained 94 paisa.

Well-informed analysts and brokerage houses are of the view that the dollar would soon touch the mark of Rs180, indicating that the decline in foreign exchange reserves coupled with higher inflation would continue to devalue the purchasing power of the local currency.

The rupee has been losing value against the US dollar despite successful negotiations with the International Monetary Fund and reports about possible release of $3 billion from the Saudi Fund.

However, the country has yet to receive funds from these sources. Pakistan has also announced plans to launch Sukuk bonds to raise $1bn.

Currency experts believe the $20bn trade deficit is enough to keep pressure on the local currency.

The demand for the greenback has remained high since the beginning of the current financial year. Since July the US dollar appreciated by 12 per cent or Rs18.88 against the local currency.

The central bank reported on Thursday that the foreign exchange reserves fell by $244 million to $16.010bn during the week that ended on Nov 26. The SBP did not offer any reason for the decline but experts believe it was due to debt repayment.

The central bank has been facing a fast decrease in the reserves since it was at its peak with over $20bn in August this year.

The holdings of the commercial banks were $6.488bn while the country’s total stood at $22.498bn.

Currency experts and bankers said the remittances have been declining as reflected from the amount in October. Compared to Sept, inflows were short by about $200m.

Bankers said if the remittances did not improve, it would badly damage the government’s plan to deal with the growing problem on external front of the economy.

The government expected to net about $32bn as remittances in the current financial year, but the trend is not positive. With rising trade deficit and low remittances, the current account deficit would be the biggest problem for the country and will hit the exchange rate hard.

The US dollar would take advantage of the situation to further pressure the rupee.

Published in Dawn, December 3rd, 2021