KARACHI: Despite rising inflows of dollars, the rupee continued its downward slide for the second consecutive session losing Rs1.67 against the greenback to close at Rs279.26 in the interbank market on Monday.

The rupee declined by Rs1.67 against the dollar on Friday closing the week at Rs277.60, according to the State Bank of Pakistan.

In the last two sessions, the dollar appreciated by Rs2.81, showing that the pressure is still on the local currency.

Inflows of $4.2 billion from Saudi Arabia, the United Arab Emirates and the International Monetary Fund (IMF) helped the rupee appreciate by Rs1.02 against the US dollar on Thursday. However, contrary to market expectations, the dollar quickly regained strength and suppressed the PKR on Monday.

The foreign exchange reserves of the SBP have almost doubled to $8.7bn with the latest inflows in the last week, but the higher demand for greenbacks kept the price high.

Dollar rate surges to Rs300 in grey market on strong demand

Despite rising foreign exchange reserves, the importers are still not free to open letters of credit (LCs). A change has come, and banks have been asked by the SBP to open LCs only if they have a sufficient amount of dollars. The imports were practically restricted. Earlier, importers were allowed to arrange dollars on their own.

However, a currency expert said that the importers have not been restricted to settling their payments for imports through deferred payments. The deferred payment is a contract between the importer and exporter, and the payment could be settled outside the country. This deferred payment could be made through the Hundi or Hawala system.

Amid high demand, the dollar price surged to Rs300 in the grey market, which pushed the open market rate up by Rs4 in a single session.

“The dollar gained Rs3 to Rs4 in the open market. The main reason is the short supply, which increased the dollar prices on Monday,” said Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan.

He said the high prices in the grey market have also affected the local exchange market, which has lost most of its business.

Published in Dawn, July 18th, 2023