KARACHI, Nov 28: The rupee on Friday failed to make any major recovery against the dollar despite inflow of $3.1 billion from the IMF under the $7.6 billion loan package.
The country received the first tranche on Thursday which pushed up the foreign exchange reserves to $9.690 billion enough for boosting confidence of the exchange market.
“The dollar traded at Rs78.90 which was slightly higher than Thursday’s rate of Rs78.85,” said Atif Ahmed, a currency dealer.
Market experts have been talking about rupee recovery against the US dollar after IMF loan and rising of foreign exchange reserves, however, the rupee failed to gain.
“How could the market react positively when the IMF is saying that Pakistan needs $20 billion for correcting its imbalances,” said the dealer and added that the IMF announcement shattered the confidence.Currency dealers are of the view that the rupee may not gain against the dollar with the rise in forex reserves as hopes for economic improvement are fading in the back drop of IMF statement regarding requirement of huge loans and expanding global recession.
Furthermore, the rupee has lost ground domestically which means 25 per cent inflation has sharply cut its purchasing power. They also feel the rupee could recover if foreign investment starts pouring in.
“The deteriorating security situation and political turmoil has turned the country less attractive for foreign investors,” said Aamir Ahmed, a researcher.
Analysts think the rising cost of production in view of after recent hike in discount rate will mar the hopes for higher exports especially for developed markets.
The United States and European economies are slashing their interest rates for bringing down production costs and simultaneously pumping hundreds of billions of dollars to save their industries through supply of cheaper products on the world markets.
Exporters said they cannot compete with the cheaper production of the developed economies which mean the country’s export will decline and the trade deficit will keep widening.
“The lower export means less dollar inflows that will mount pressure on current account imbalances and the rupee may remain subdued against the dollar,” observed Mr Atif.
He said the import bill would witness a sharp decline as the oil prices have fallen down to around $55 from the record high of $147 per barrel.
Pakistan spend over $12 billion on petroleum products imports during 2007-08 and this bill would come down around $5 to $6 billion if prices remain stable around this level.
