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Rupee recovers as market awaits new Finance Minister

Rupee recovers as market awaits new Finance Minister

Rupee recovers as market awaits new Finance Minister

Rupee recovers as market awaits new Finance Minister.

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  • The exchange rate witnessed a gain of Rs2.63 to reach Rs237.02 against the dollar from Friday’s closing of Rs239.65.
  • The latest recovery in the value of the local unit can also be attributed to a decline in the international oil prices.
  • Foreign exchange reserves also recorded a decline on the back of less inflows and higher imports.
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The rupee recorded a major gain against the dollar on Monday as the market rejoiced at the news of the likely appointment of Ishaq Dar as the new finance minister.

The exchange rate witnessed a gain of Rs2.63 to reach Rs237.02 against the dollar from Friday’s closing of Rs239.65 at the interbank exchange market.

Analysts said that the market is optimistic that the upcoming finance minister will likely take measures to arrest the flight of the dollar to support the local economy.

Dar, known for keeping the rupee overvalued against the dollar, is expected to become the country’s new finance minister after Miftah Ismail officially resigns from his post.

The latest recovery in the value of the local unit can also be attributed to a decline in the international oil prices which slid to below $80/barrel.

Pakistan is a net importer of petroleum products and any change in the global oil prices directly impacts the current account of the country.

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The expected inflows of the foreign currency in the future from multilateral institutions and friendly countries to help Pakistan fight against flood losses also helped the rupee regain its ground.

The government also secured some economic support from Saudi Arabia, to provide the required stability to the exchange rate.

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The Saudi Fund for Development (SFD) has confirmed a rollover of a $3 billion deposit maturing on December 5, for one year. The deposit is placed with the SBP and is part of its foreign exchange reserves.

An ease in the current account deficit was also witnessed during the current fiscal year. Pakistan’s current account deficit shrank 19 per cent during the first two months of the fiscal year 2023 due to a lower import bill and increase in exports.

Cumulatively, the country recorded a current account deficit amounting to $1.92 billion in the first two months of ongoing fiscal year, compared with $2.37 billion in the same period of last fiscal year, depicting a decline of $456 million, a report by the State Bank of Pakistan (SBP) showed.

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The decline in the current account deficit is due to an 11 per cent surge in exports and around 2 per cent contraction in the import bill, the central bank said.

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

The foreign currency reserves held by the State Bank of Pakistan (SBP) recorded a decline of $278 million to reach $8.34 billion during the week ended September 16, compared with $8.62 billion on September 9.

The overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $14.06 billion. The net reserves held by banks amounted to $5.72 billion.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs32.17 or 15.70 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs237.02.

At the open market, the buying and selling of the dollar was recorded at Rs236.1 and Rs238.5 at 3:30pm PST.

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