KARACHI: The dollar remained unchanged at Rs227.75 on Saturday in the open market, unmoved by Finance Minister Ishaq Dar’s guarantee a day ago that the country had secured about $13 billion in additional financial support from two friendly countries, on top of assurances for about $20bn investments.

However, dealers in the open market hoped the rupee would gain strength once the inflows began to land in Pakistan.

“Though the dollar was steady, the market sentiment did change on Saturday,” said Malik Bostan, chairman of the Exchange Companies Association of Pakistan (ECAP). “Buyers disappeared from the open market anticipating a fall in dollar’s rate in the coming days.”

On Friday, Mr Dar told journalists that during Prime Minister Shehbaz Sharif’s recent visit to Beijing, the Chinese leadership promised to roll over $4bn in sovereign loans, refinance $3.3bn commercial bank loans and increase currency swap by about $1.45bn — from 30bn yuan to 40bn yuan. The total worked out at $8.75bn.

Dollar steady in open market as news of $13bn coming in from China, S. Arabia fails to make immediate impact

Besides, Saudi Arabia had also “given a positive response” to Pakistan’s request for increasing its financing by another $3bn to $6bn and doubling its deferred oil facility of $1.2bn, he said. The two heads worked out at $4.2bn and the finance minister said there was no delay except a month or so of processing time.

Meanwhile, the State Bank has promised to consider ECAP’s request to let exchange firms use up to 20 per cent of remittances to sate the open market’s appetite for dollars.

Currency dealers in the interbank market are also closely watching the situation, and an impact will be visible when trading resumes tomorrow.

Currency experts are still unsure when the dollar’s grip will be over. Several experts and bankers believe that the exchange rate would not support the rupee unless economic fundamentals improve, particularly until foreign exchange reserves rise to a considerable level and the current account deficit narrows.

“We must stop the flow of dollars to Kabul, either through trading or smuggling, Mr Bostan said. “Kabul is eating up our hard-earned dollars and the government has yet not taken action.” He suggested that trade with Afghanistan should only be made in rupees.

Other currency experts also want the trade deficit to narrow, as the country’s imports are still double its exports, which also impacts the current account.

Another issue is a fall in the inflow of remittances, which dropped in September by $280 million on monthly and by $340m on annual bases. If this persists, “the current account deficit will surely rise and the exchange rate will remain in the dollar’s grip,” an expert said.

Published in Dawn, November 6th, 2022