KARACHI: Despite an inflow of $2 billion into the account of the State Bank of Pakistan (SBP), the exchange rate remained vulnerable as the local currency lost 0.8 per cent or Rs1.3 per dollar in the interbank market in the last 10 days.

Currency dealers said the falling SBP’s foreign exchange reserves due to massive debt repayments kept the rupee under pressure.

The dollar price fell to Rs174.47 on Feb 7 but since then it maintains a bullish trend against the local currency and traded at Rs175.86 on Feb 18.

“Higher demand from importers is a key factor for dollar appreciation. The import bill could not be controlled mainly on account of very high oil prices on the international market,” said Atif Ahmed, a currency dealer in the interbank market.

He said the demand for dollars remained high despite several steps taken by the federal government and the SBP to bring down the import bill.

“The dollar has the potential to appreciate more rapidly against the local currency but the SBP has been influencing the market to check its rise,” said Mr Atif.

The central bank always denies intervention, but market dealers say the SBP usually influences the exchange rates through one or two large banks.

Currency dealers find it encouraging that inflows from remittances are higher than last year as the country received about $18bn in the first seven months of FY22, an increase of 9 per cent over the same period last year.

A massive outflow of $2.97bn from the SBP reserves since August 2021 has created uncertainty in the market, they maintained. The loss occurred despite inflows of $2bn through IMF and sukuk proceeds this month.

“The inflows of remittances are higher and the country may surpass the $30bn target for the current fiscal FY22,” said Zafar Paracha, Secretary-General Exchange Companies Association of Pakistan (ECAP).

Some currency dealers said the outflow of dollars could go higher since Covid-related restrictions have been relaxed by many countries and Pakistanis are expected to travel abroad in much bigger numbers this year.

They, however, noted that the dollars are not being purchased for performing haj and umrah as restrictions have yet not been lifted by the Saudi government.

Published in Dawn, February 20th, 2022