Uncertainty in global oil market may keep rupee unstable

KARACHI: The rupee is expected to remain unstable next week, owing to the uncertainty in the international oil prices and a surge in the domestic demand for imported goods, analysts said.

The local currency remained dependent on the movement of international oil prices during the outgoing week. It lost 39 paisas against the dollar during the week (February 14 to February 18).

The international oil prices remained volatile since the rising tensions between Russia and Ukraine. The oil prices were moving with the statements and actions on the issue.

Pakistan is the net importer of petroleum products and any surge in the international oil prices directly increases the import bill.

The oil bill of the country surged 107 per cent to $11.7 billion during 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.

The ease in restrictions related to the coronavirus pandemic in major economies will also increase the demand, which will subsequently impact the international oil prices.

Besides, the domestic economy is also expanding and it requires imported goods in the shape of raw materials and finished products. The large-scale manufacturing (LSM) recorded a 10.5 per cent increase on a month-on-month (MoM) basis in December 2021, according to the Pakistan Bureau of Statistics (PBS).

On a year-on-year (YoY) basis, LSM went up 6.4 per cent in December 2021.

Pakistan’s total import bill sharply increased 59 per cent to $46.61 billion, compared with $29.25 billion in the corresponding period of the last fiscal year.

In the last couple of weeks, the local unit was supported by the external inflows. The State Bank of Pakistan (SBP) received funds from the IMF and proceeds of Sukuk, which boosted the foreign exchange reserves of the country. However, the scheduled repayments are again depleting the foreign exchange deposits.

The liquid foreign exchange reserves of the country slipped $231 million to $23.49 billion by the week ended February 11, 2022, compared with $23.721 billion a week ago.

Similarly, the official foreign exchange reserves of the central bank fell $241 million to $17.096 billion by the week ended February 11, 2022, compared with $17.337 billion a week ago.

The rupee remained under pressured since the start of the current fiscal year. The local unit recorded a decline of Rs18.32, or 11.63 per cent, from Rs157.54 on June 30, 2021 to the present level of Rs175.86.

The local currency fell to the record low of Rs178.24 against the dollar on December 29, 2021.