Rupee gains for sixth consecutive session

KARACHI: The Pakistani rupee upward movement continued for the sixth straight session against the dollar on Friday due to the aggressive measures taken by the State Bank of Pakistan (SBP) to lend support to the local unit, dealers said.

The rupee gained 11 paisas to close at Rs181.58 to the dollar from last day’s closing of Rs181.69 in the interbank foreign exchange market۔

The local currency showed continuous recovery since last Friday amid an unprecedented increase in the key policy rate by the SBP coupled with other measures to curb the import bill of the country.

The central bank, on April 7, announced a significant increase in the key policy rate by 250 basis points to 12.25 per cent from 9.75 per cent in an emergency meeting of the Monetary Policy Committee (MPC).

The central bank also imposed 100 per cent cash margins on 177 items in a bid to curb their imports, which helped easing pressure on the rupee and reducing trade and the current account deficits, the dealers added.

The local currency hit the historic low of Rs188.18 on April 7, as the country faced the worst political crisis resulting in uncertain economic conditions.

The country was in a state of turmoil when the then opposition parties moved a no-confidence motion against former Prime Minister Imran Khan which resulted in his ouster.

The delay in the proceeding of the National Assembly on the motion moved by the then opposition, and President Arif Alvi dissolving the Cabinet and the National Assembly, further fueled the instability in the country.

However, with the no-confidence motion successful and Shehbaz Sharif becoming Prime Minister of Pakistan, provided a sigh of relief to the citizens and the economic conditions of the country.

Along with the political uncertainty, the significant decline in the foreign exchange reserves of the country also played a role in the slump in the value of the rupee.

The foreign exchange reserves declined around 36 per cent during the last seven months. The country’s foreign exchange reserves hit an all-time high of $27.23 billion on August 27, 2021 and fell to $17.47 billion by the week ended April 1, 2022.

The ever-widening current account deficit, volatile global commodity prices after Russia, one of the biggest oil and gas producer countries, went on a war with Ukraine, which also played its part in the depreciation of the local currency.

The ballooning current account deficit is another reason for escalation in the dollar value. Pakistan’s current account deficit ballooned to $12 billion during the first eight months (July – February) 2021/22 against a surplus of $994 million in the corresponding months of the last fiscal year.

Although the current account deficit narrowed to $545 million in February 2022, compared with the deficit of $2.53 billion in January 2022, the scheduled external repayments are still a threat to the balance of payment.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs24.04 or 15.25 per cent from Rs157.54 to dollar on June 30, 2021 to the current level of Rs181.58.
At the open market, the buying and selling of the dollar was recorded at Rs181 and Rs183 at 4:30pm PST.