KARACHI: The dollar jumped over one per cent against the rupee to cross the 210 mark in the interbank market on Wednesday as trading resumed after a gap of six days.

According to the State Bank of Pakistan (SBP), the local currency lost Rs2.19, or 1.04pc, against the greenback to close at Rs210.1.

The long Eid holidays depressed the local currency despite widespread media reports about a staff-level agreement with the Inter­national Monetary Fund (IMF).

After reaching a peak of Rs211.93 on June 22, the dollar started declining for a brief period and fell to a low of Rs204.56 on July 4.

However, the strength gained by the rupee after $2.3 billion Chinese inflows has evaporated within a couple of weeks, as the dollar snapped the rupee’s rising streak and gained Rs2.38 in the interbank market on July 5, the first appreciation in the new fiscal year. Since then, the greenback has continued to rise.

“The dollar was traded at Rs210.10 in the inter-bank mainly on account of fears that the State Bank’s payment capacity has been declining,” said a currency dealer in the interbank market.

Reports circulating in the media suggested that Pakistan has reached a staff-level agreement with the IMF and a $1.2bn loan disbursement is expected in August. However, the news failed to have a positive impact on the currency market.

The rupee has particularly depreciated in recent months owing to a worsening external account, which was in a deficit of over $15bn during the 11 months from July to May and may reach $18bn during the entire fiscal year.

The final report about the current account deficit has not been released yet, whereas the SBP’s foreign exchange reserves stand at around $9.8bn.

Currency experts see no chance for a rise in the rupee’s value without any miracle as the hope for inflows is limited while the international debt market would not respond to any initiation for launching a bond to raise dollars.

“The only hope is that the country’s import bill falls with the declining oil prices, but the government still needs to slash unnecessary imports,” said Atif Ahmed, a currency dealer in the interbank market.

However, at the same time, the financial sector believes that the exports will decline since the government has increased the interest rate on the export finance scheme and long-term financing. The interest rate is now 10pc for them while the policy interest rate at 15pc.

“Another aspect is that global oil prices are declining because of low demand showing recession in the developed and developing economies, which means demand for exportable from countries like Pakistan will fall,” said Aamir Aziz, an exporter of readymade garments to Europe. He feared a drop in the country’s exports in the ongoing fiscal year.

Published in Dawn, July 14th, 2022