Rupee falls 88 paisas against US dollar

• The exchange rate witnessed a loss of 88 paisas to reach Rs219.86 against the dollar.
• The local currency fell to the historic low of Rs239.94 on July 28, 2022.
• Pakistan’s trade deficit widened in August, with analysts expecting a further uptick in imports.

KARACHI: The rupee fell against the dollar on Monday, amid a widening trade deficit and disrupted economic activities due to incessant rains in the country.

The exchange rate witnessed a loss of 88 paisas to reach Rs219.86 against the dollar from Friday’s closing of Rs218.98. The local currency fell to the historic low of Rs239.94 against the dollar on July 28, 2022.

Currency experts said that the local unit declined as the country has moved to import essential commodities due to the destruction of crops in the record rains and the subsequent floods in the country.

Finance Minister Miftah Ismail has estimated a loss of at least $10 billion, caused by weeks of torrential rains and subsequent floods, with Sindh, in particular, suffering damages of over $1.6 billion as all major crops have been destroyed.

After ease in July, Pakistan’s trade deficit widened in August, with analysts expecting a further uptick in the imports.

According to the Pakistan Bureau of Statistics (PBS) data, the trade deficit clocked in at $3.53 billion in August, compared with $2.73 billion, showing an increase of 28.89 percent.

During the month, the imports recorded an increase of 20.84 percent to $6.03 billion, compared with $4.99 billion during the previous month.
Further, the country is witnessing record inflation due to hiked commodity prices, as the Consumer Price Index (CPI) increased to 27.26 percent in August.

The shrinking foreign exchange reserves also remain a key challenge in stabilizing the value of the rupee as it witnessed another decline during the outgoing week.

The foreign exchange reserves held by the central bank recorded a decline of $113 million to reach $7.69 billion during the week ended August 26, compared with $7.80 billion on August 19.

The overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $13.40 billion. The net reserves held by banks amounted to $5.70 billion.

The country’s current account deficit rose 531 percent to over $17 billion during the fiscal year 2022 due to massive increase in goods import bill. Overall, the current account deficit was $17.4 billion during the fiscal year 2022, compared with $2.8 billion in the fiscal year 2021, depicting an increase of $14.6 billion.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs15.01 or 7.32 percent from Rs204.85 to the dollar on June 30, 2022, to the current level of Rs219.86.

At the open market, the buying and selling of the dollar were recorded at Rs221 and Rs223 at 4:30 pm PST.

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