KARACHI: The rupee is expected to remain under pressure against the dollar next week, owing to the Russian attack on Ukraine and the higher current account deficit.
The rupee witnessed a significant decline in the last two days of the week (February 21 to 25), as Russia intensified attacks on the Ukrainian territory. The rupee lost 95 paisas during the last two trading sessions.
The Russian attacks resulted in volatile oil trade in the international markets. The benchmark Brent crude hit a seven-year high to reach over $103/barrel. Any upward movement in the international oil prices directly impact the oil import bill of Pakistan.
The country is a net importer of petroleum products to meet the domestic demand. The oil bill of the country surged 107 per cent to $11.7 billion in the first seven months (July-January) of the current fiscal year, compared with $5.64 billion in the corresponding months of the last fiscal year.
Experts believe that as war prolongs the international oil prices would move upward and subsequently affect the rupee value. Besides, a sharp rise in the current account deficit also put additional pressure on the local currency.
The country’s current account widened to the highest-ever monthly deficit of $2.6 billion in January 2022, compared with $1.9 billion in December 2021, taking the current account deficit to $11.6 billion in the first seven months of the current fiscal year.
Further, the depleting foreign exchange reserves also impacted the rupee stability. The liquid foreign exchange reserves of Pakistan declined $264 million to $23.226 billion by the week ended February 18, 2022.
The foreign exchange reserves of the country stood at $23.49 billion by the week ended February 11, 2022. The forex reserves of the State Bank of Pakistan fell $289 million to $16.807 billion by the week ended February 18, 2022, compared with $17.096 billion a week ago.
The foreign exchange reserves witnessed a significant improvement during the last couple of months due to inflows from Saudi Arabia, the International Monetary Fund (IMF) and the Sukuk proceeds. However, the scheduled repayment against the foreign debt kept the pressure on the external side.
The rupee remained under pressure since the start of the current fiscal year. The local unit recorded a decline of Rs19.57, or 12.42 per cent, from Rs157.54 on June 30, 2021 to the current level of Rs177.11.
The local currency fell to the record low of Rs178.24 against the dollar on December 29, 2021.
