Rupee flight continues for fifth session in a row

KARACHI: The Pakistani rupee gained 28 paisas to reach Rs197.59 on Thursday on the back of positive sentiments on the economic and political front in the country.

The local unit recorded an increase of 28 paisas to close at Rs197.59 to the dollar from Wednesday’s closing of Rs198.87 in the interbank foreign exchange market. The rupee recorded the historic low of Rs202.01 on May 26, 2022.

The rupee has been on a continuous upward stream where it ascended in the previous five consecutive sessions after the government removed the subsidy on the prices of fuel, the dealers said.

These measures are expected to help the government officials in convincing the IMF staff to revive and extend the multibillion dollar Extended Fund Facility (EFF) programme, they added.

The investors’ confidence was strengthened with the government’s announcement of the subsidy removal as the IMF had put the condition of cutting the subsidy on fuel prices along with others in order to resume the dialogues for the revival of the much needed financial assistance programme.

With the successful completion of the IMF programme, the country can boost the confidence of the local traders and investors along with other multilateral lenders and friendly countries to help the country boost its drastically declining foreign exchange reserves.

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 Rs40.05 or 25.42 per cent from Rs157.54 to dollar on June 30, 2021 to the current level of Rs197.59.

At the open market, the buying and selling of the dollar was recorded at Rs196.4 and Rs198.5 at 4:30pm PST.