KARACHI: The rupee on Monday continued losing its value despite falling demand for US dollars in the interbank market.
The State Bank of Pakistan (SBP) reported the greenback closed at Rs287.55 after gaining 52 paise over last session’s Rs287.03. The local currency has weakened by four per cent against the dollar since the start of the declining trend in mid-October.
Currency experts and dealers have no clue about the endpoint of the rupee’s losing streak which entered the 15th consecutive session, gradually drifting to an all-time low of Rs307.10 hit in the first week of September.
However, they blame the short supply of dollars as the common factor behind the day-on-day deprecation of the local currency. Some experts say the PKR devaluation has no match with the other regional currencies’ depreciation.
“The devaluation of local currency is not the regional trend. It is the case of weak fundamentals with low foreign exchange reserves and the country’s dependence on borrowed help from external sources,” said a senior banker.
Pakistan is currently engaged with the IMF for the release of a second tranche of $710m under the nine-month $3bn Standby Arrangement (SBA).
Despite positive signals from the government side about the ongoing first quarterly review under the SBA, the market sentiments remained depressive not allowing the local currency to resist further decline in its value.
Bankers said the government has been paying for the debt servicing during the current fiscal year while it succeeded in keeping the foreign exchange reserves reasonably at $7.5bn. However, bankers maintained that the SBP was one of the major buyers of dollars from the banking market.
Currency dealers said the inflows during September and October remained high mainly due to dollar depreciation which forced the exporters to sell out their maximum proceeds.
At the same time, others found it hard to hold on to their dollar savings while its price was falling in the interbank market after a crackdown launched against the smuggling and illegal currency business.
“This will be shocking news for the government that imports have been declining which would reduce the current account deficit but will badly hit the economic growth,” said a senior analyst not willing to be identified.
He said the elevated inflation of around 30pc has increased the cost of doing business to unsustainable levels making it impossible for trade and industry to even think about fresh investment.
Bankers and researchers said the only major change could be possible with the high inflows of foreign direct investment (FDI). They said the government planned to invite investors mainly from the Middle East but the Israeli war on Gaza would not allow the investors from Arab countries to explore opportunities in Pakistan.
The FDI in the first quarter of FY24 witnessed an improvement of 15pc to $402 million, but it is too meagre to bring any change in an economy of 250 million people.
Published in Dawn, November 14th, 2023