Rupee free fall continues in interbank market

KARACHI: The rupee continued its downward momentum against the dollar on Friday as it shed 96 paisas in the interbank foreign exchange market amid deteriorating macroeconomics of the country.

The exchange rate witnessed a loss of 96 paisas to reach Rs236.84 against the dollar from the previous days’ closing of Rs235.88 at the interbank exchange market.

The latest decline is the rupee’s 11th consecutive loss against the greenback. The local unit has remained under continuous pressure due to the weakening economy of Pakistan as it faces multifaceted issues.

The catastrophic floods all across the country has hit the industrial and agriculture activities alike. Almost all of the agriculture of Pakistan has been destroyed in the record monsoon rain and subsequent flash floods which will likely hit the growth rate.

Likewise, the government has not had any success in securing additional loan or investment agreements with global multilateral institutions and friendly countries.

The country’s current account and trade deficit are expected to widen further as the government is moving to import essential food items. On the flip side, the industrial activities have been badly disrupted which will massively impact the exports of the country.

Pakistan’s trade deficit swelled 31 per cent on a month-on-month basis to hit $3.5 billion, data by the Pakistan Bureau of Statistics (PBS) showed.

According to data released by PBS, the petroleum group imports registered a 29.93 per cent growth in August 2022 on a month-on-month basis to stand at $1.86 billion compared with $1.43 billion in July 2022.

Pakistan’s petroleum group imports witnessed a growth of 6.97 per cent during the first two months (July-August) of the fiscal year 2023 and stood at $3.30 billion, compared with $3.08 billion during the same period of last fiscal year.

Likewise, the foreign exchange reserves of the country have also recorded a decline on the back of less inflows and higher imports.

The foreign exchange reserves held by the State Bank of Pakistan (SBP) fell $176 million to reach 8.62 billion during the week ended September 9, compared with $8.79 billion on September 2.

The overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $14.31 billion. The net reserves held by banks amounted to $5.69 billion.

The country’s current account deficit rose 531 per cent 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 Rs31.99 or 15.61 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs236.84.

At the open market, the buying and selling of the dollar was recorded at Rs240.2 and Rs241.2 at 5:30pm PST.

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