KARACHI: An assurance from the International Monetary Fund about the success of talks with Islamabad helped tilt the exchange rate in favour of the rupee on Thursday. The dollar depreciated after 17 consecutive appreciations in the inter-bank market.

The IMF, however, expressed reservations by saying that the rupee must remain market-determined to alleviate external pressures and rebuild reserves.

The IMF advised Pakistan to strengthen the transparency and efficiency of the forex market and to refrain from administrative actions to influence the rupee. The State Bank of Pakistan (SBP) has been trying to maintain transparency, but currency dealers said there was nothing unusual these days about the advice to keep the exchange rate under control.

Currency dealers said reports about an inflow of $700 million from the IMF under the Standby Arrangement of $3 billion, had changed the market sentiment.

A banker dealing with the market said the other positive development was the assurances by the UAE and Saudi Arabia that they would help bridge the debt servicing gap.

“It is important that dollar declined after continuous 17 appreciations against the rupee, but the sustainability of this change is not certain,” said the banker.

The bankers were reluctant to say the dollar may reverse its course, as it did after a crackdown was launched against illegal currency business and smuggling. The US currency fell from Rs307.10 in the first week of September to Rs276.5 in mid-October.

The SBP reported the closing price of dollar at Rs287.38 on Thursday, compared to Rs288.14 a day before; the dollar fell by 76 paise.

Bankers said inflows of $2.5bn in the shape of remittances last month had raised hopes for higher inflows in November.

It would help strengthen the exchange rate.

The open market reported on Thursday the greenback had declined by 75 paisa from Rs289.50 to Rs288.75. Currency dealers said the market was normal, even though trading was slow.

SBP reserves fall

The SBP reported that foreign exchange reserves had declined by $115m to $7.396bn during the week ending on Nov 10.

“The SBP’s reserves decreased by $115m to $7.396bn due to debt repayments,” said a press release.

Debt repayment has been a prime subject for the State Bank and this was the reason that the central bank kept buying dollars from the market during the current fiscal year. The foreign exchange reserves of commercial banks rose by $36m to $5.138bn during the same week while the country’s total reserves fell by $79m to $12.535bn.

Published in Dawn, November 17th, 2023