KARACHI: As the first review under the IMF’s $3bn Stand-By Arrangement is set to start on Thursday (today), the rupee maintained a downward trajectory on Wednesday against the US dollar creating uncertainty about the future trend.

The greenback has been appreciating for the last eight sessions but the appreciation of Rs1.18 on Wednesday shook the confidence of the importers and exporters as well.

Some currency experts blame banks for reversing the exchange rate trend to make money by increasing the dollar rates.

“This is a false allegation. It is a matter of supply and demand. The supply is shrinking while the demand is on the rise pushing the dollar price,” said Atif Ahmed, a currency dealer in the interbank market.

The State Bank of Pakistan (SBP) reported the closing price of the dollar at Rs282.65 from Rs281.47 a day earlier, a depreciation of 0.42 per cent.

Sources in the banking market said that banks are offering higher rates since exporters have stopped selling their holdings. “The higher offers have changed the market sentiment, which needs to be stopped to check the rupee’s depreciation,” said Zafar Paracha, General Secretary Exchange Companies Association of Pakistan.

He said the supply of dollars decreased in October as the growth in exports was not significant. He recalled that the positive sentiment for PKR was achieved after a crackdown and tough administrative measures were initiated against the illegal currency business in September. “It should not be wasted,” he added.

In the open market, the dollar also gained 50 paise to close at Rs283.50. However, the exchange companies said they were regularly selling dollars to banks.

“The interbank market is not only feeding the importers but the SBP is also buying dollars for debt servicing,” said a senior banker.

The central bank is buying greenbacks to keep its foreign exchange reserves at around $8bn level before the talks begin with the IMF.

Finance Minister Shamshad Akhtar is confident of successfully negotiating with the IMF for the release of the $710 million second tranche on the basis of a better economic performance in the first quarter of the current fiscal year.

Published in Dawn, November 2nd, 2023