Rupee likely to remain unstable next week

KARACHI: The rupee is likely to remain unstable next week due to high volatile international oil prices and country’s external sector weaknesses.

The rupee lost 39 paisas against the dollar during the week (February 28-March 4). The benchmark Brent crude topped $120/barrel during the ongoing week but retreated to $111/barrel on Friday.

The reports of further escalation between Russia and Ukraine resulted in an upsurge in the international oil prices to $114 billion till filing of this report at 5:00pm PST.

Pakistan’s oil import bill is linked with the international oil prices and any surge in the global oil prices resulted in high import bill and depreciation in the local currency.

The import bill of petroleum group recorded an increase of 107 per cent to $11.7 billion during the first seven months of the current fiscal year, compared with $5.64 billion in the corresponding months of the last fiscal year.

On the last day of the week, March 4, 2022, the rupee made a recovery due to rescheduling of foreign debt. This may help the local currency to make further gains next week.

On March 3, 2022, Pakistan and the Saudi Fund for Development (SFD) signed agreements on debt service suspension, amounting to $846 million. The agreements have been signed under the G-20 Debt Service Suspension Initiative (DSSI) Framework.

The rupee may also get support due to better export earnings. The exports registered an increase of 26 per cent to $20.54 billion in July-February 2021/22, compared with $16.32 billion in the corresponding period of the last fiscal year.

Besides, the import bill also showed an increase of 55 per cent to $52.5 billion during the period under review, compared with $33.56 billion in the same period of the last fiscal year. This resulted in widening of trade deficit by 82 per cent to $32 billion during the first eight months of the current fiscal year, compared with the deficit of $17.53 billion in the same period of the last fiscal year.

The high trade deficit also impacted the balance of payments position.

The country’s current account surged to its highest-ever monthly deficit of $2.6 billion in January 2022 ($1.9 billion in December 2021), taking it to $11.6 billion during the first seven months of the current fiscal year.

The local unit recorded a decline of Rs19.96, or 12.65 per cent, from Rs157.54 on June 30, 2021 to the current level of Rs177.50. The rupee recorded an all-time low of Rs178.24 against the dollar on December 29, 2021.