Exchange rate volatility likely to continue

KARACHI: The volatile exchange rate is expected to continue next week, owing to higher dollar demand for import and corporate payments by the year-end.

The rupee ended the week with an all-time low of Rs178.04 on December 17, 2021. The local currency lost 33 paisas, or 0.2 per cent, during the week, despite harsh measures taken by the State Bank of Pakistan (SBP) to increase the policy rate substantially.

The dealers believe the demand for the foreign currency was much larger than the measures taken by the regulator.

The deposit of $3 billion by the Saudi Fund for Development (SDF) with the State Bank of Pakistan (SBP) also failed to support the rupee.

Last week, the Saudi Fund placed the amount with the Pakistani central bank, which helped increase the official foreign exchange reserves.

The latest foreign exchange numbers revealed that the reserves recorded a decline of $123 million to $25.028 billion by the week ended December 10, 2021. The official reserves of the SBP fell $90 million to $18.568 billion by the week ended December 10, 2021, compared with $18.658 billion a week ago.

Meanwhile, the large import bill remained a big challenge for the rupee stability. The import bill sharply increased 69.17 per cent to $32.93 billion during the first five months (July-November) 2021/22, compared with $19.47 billion in the same period of the last fiscal year.

The rising import bill widened the trade deficit massively. The trade deficit ballooned 112 per cent to $20.59 billion during the first five months of the current fiscal year, compared with the deficit of $9.72 billion.

Similarly, the foreign inflows are not sufficient to meet the demand for external payments.

The exports of the country recorded 27 per cent growth to $12.34 billion during the first five months of the current fiscal year, compared with $9.74 billion in the corresponding period of the last fiscal year.

Meanwhile, the inflows of foreign remittances sent by the overseas Pakistanis recorded a decline in November 2021, compared with the inflows in the preceding month. The inflows of remittances were $2.352 billion in November 2021, compared with the inflows of $2.517 billion in October 2021.

The rupee remained under pressure since the start of the current fiscal year. The local currency fell Rs20.50, or 13.01 per cent, from June 30, 2021 closing of Rs157.54 to the closing of Rs178.04 on December 17, 2021.

Also Read

Textile exports surge 28.41% to $7.758 billion in five months

ISLAMABAD: The exports of textile commodities witnessed an increase of 28.41 per...