Rupee recovers Rs 2.25 against dollar

KARACHI: The Pakistani rupee gained Rs 2.25 to reach Rs199.76 on Friday as the government met the International Monetary Fund’s (IMF) condition of slashing the subsidy on the prices of fuel.

The local unit recovered Rs2.25 to close at Rs199.76 to the dollar from Thursday’s closing of Rs202.01 in the interbank foreign exchange market. The rupee recorded the historic low of Rs202.01 on May 26, 2022.

The dealers said that the government’s measure to cut the subsidy on the prices of fuel is likely to pave the way for the successful completion of the seventh review of the Extended Fund Facility (EFF) programme, which has boosted the investors’ confidence.

The market celebrated the latest measures as the government has taken a step to further the process of the negotiation with the IMF for the revival of the much needed EFF programme, they added.

Pakistan’s successful completion of the review talks with the IMF will go a long way in boosting the confidence of investors and other multilateral lenders.

However, the continuous decline in the foreign exchange reserves of the country pose a significant risk to the stability in the value of rupee.

The country’s total liquid foreign exchange reserves declined $11 million to $16.150 billion during the week ended May 20, 2022, compared with $16.161 billion as of May 13, 2022.

The State Bank of Pakistan’s (SBP) reserves fell $75 million to $10.089 billion due to external debt repayment. However, the net foreign reserves held by the commercial banks were up $63 million to $6.061 billion.

The widening current account deficit is another threat to the stability of the local unit. Pakistan’s trade deficit showed a sharp growth to $3.64 billion in March 2022, registering an increase of 12 per cent over the same month of the last fiscal.

The total trade deficit escalated to $35.52 billion in the first nine months (July-March) period of the current fiscal year against $20.8 billion in the same period last fiscal year.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs 42.22 or 26.79 per cent from Rs157.54 to dollar on June 30, 2021 to the current level of Rs 199.76.

At the open market, the buying and selling of the dollar was recorded at Rs200 and Rs202 at 4:15 pm PST.