KARACHI: The rupee failed to resist the mounting pressure of the US dollar and witnessed a further loss of Rs1.56 in the interbank market on Tuesday.

It may be surprising for many who were waiting to see a dollar depreciation after an inflow of over $1 billion from the International Monetary Fund (IMF), but currency experts said the shortage of greenbacks is the reason behind a weak rupee.

Earlier, the market was expecting that the resumption of the IMF loan would open windows for credit inflows from many sources, but the situation is disappointing. The foreign exchange reserves of the country have been declining since the debt servicing is continuous. The government is required to arrange $35 billion for the entire fiscal year (FY23).

Speaking to Dawn, currency experts said the market is keenly watching the situation and its response is clearly indicative. The calculations show that despite over $31bn in inflows of remittances, the country will need $35bn since the import gap will require more than remittances while the current account deficit demands more dollars to fill the hole in the external account.

Rate gap between interbank and open market widens

There are also reports in the media that Qatar has refused to keep $3bn in accounts of the State Bank of Pakistan. However, there is no official confirmation of this report.

The government is willing to arrange dollars from the Kingdom of Saudi Arabia, the United Arab Emirates and Qatar.

Finance Minister Miftah Ismail is planning to ask the World Bank and Asian Development Bank to help the country with flood damage. The initial assessment is that th e country has lost $10 to $12.5 billion in the flood across the country.

The dollar was up by Rs1.56 to close at Rs221.42 in the interbank market. After hitting a low of Rs213.90 on Aug 16, the greenback has gained Rs7.52 against the local currency.

The dollar is trading at Rs233 on the open market, up Rs3 from the previous day. The open market value of the dollar has increased by Rs23 since Aug 1.

The open market has been short of foreign currencies for the last three weeks, which has resulted in dollar shortages.

Currency dealers in the open market said the inflow of foreign currencies is at its lowest. They blamed the government’s decision for this crisis.

The government has made it compulsory to declare cash and other valuables even at arrivals. Now the Pakistanis, who are not satisfied with this condition, are avoiding bringing foreign currencies. The dealers said there is no selling in the open market, no export of these currencies and no import of dollars against these currencies.

Currency dealers further said that the grey market has appeared to buy dollars and other currencies at higher rates, which is the reason for the increasing gap in the greenback rates between the open and banking markets.

Published in Dawn, September 7th, 2022