Rupee continues downward momentum against dollar

KARACHI: The Pakistani rupee fell for the seventh consecutive session against the dollar on Monday, as the debt crisis worsened, besides a lack of inflows, dealers said.

The exchange rate shed 49 paisas against the dollar to reach Rs223.66 from Friday’s closing of Rs223.17 in the interbank foreign exchange market.

Currency experts said that the market is feeling the heat of uncertain macroeconomics as the country’s 5-Year credit default swap (CDS) increased to 7,933 bps on November 16, from 7,550 bps on November 15, constituting a single-day of increase of 383.8 bps.

The increase came on the back of falling foreign exchange reserves held by the State Bank of Pakistan (SBP) that declined to less than $8 billion.

The foreign exchange reserves held by the State Bank of Pakistan (SBP) witnessed an increase of $3 million to reach $7.96 billion during the week ended November 11, compared with $7.95 billion on November 4.

The country’s total liquid foreign exchange reserves rose by $75.2 million to clock-in at $13.79 billion as of November 11, up from $13.72 billion during the previous week.

The net foreign exchange reserves held by the commercial banks surged by $72.2 million to $5.83 billion at the end of last week, compared with $5.76 billion a week earlier.

Additionally, the negotiations between Pakistan and the International Monetary Fund (IMF) were delayed for the ninth review amid a lack of clarity on flood-related financial requirements for this fiscal year and declining revenue stream in the wake of import controls.

Pakistan’s current account deficit narrowed by 47 per cent in the first four months of fiscal year 2022/23, data by the State Bank of Pakistan (SBP) showed.

The CAD contracted to $2.82 billion during the first four months of the current fiscal year, compared with the deficit of $5.31 billion in the corresponding months of the last fiscal year.

The analysts attributed the contraction in current account deficit to a significant fall in the import bill of the country, which resulted in narrowing the trade deficit.

The net foreign direct investment (FDI) in Pakistan slumped 62 per cent to $95 million in October 2022, compared with $247.3 million in the same month last year. However, the net FDI was up 13 per cent, compared with $84 million recorded in September 2022.

During the first four months of fiscal year 2023, the net FDI dropped 52 per cent year-on-year to $348 million, compared with $726 million during the same period of last fiscal year.

The workers remittances have also declined 15.7 per cent to reach $2.21 billion in October, compared with $2.62 billion in the same month of the last year.

On a monthly basis, the remittances witnessed a decline of 9 per cent, compared with $2.43 billion received during September.

The country’s services trade deficit slashed by over 26 per cent to 647.4 million during the first quarter of the fiscal year 2023, as against $877.3 million recorded in the same period last fiscal.

The textile exports declined 15.2 per cent to reach $1.35 billion in October, compared with $1.6 billion in the corresponding month of the last year.

On a monthly basis, the exports declined 11.1 per cent with a major decline in components including cotton cloth, knitwear, bedwear, towels, and readymade garments.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs18.81 or 9.18 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs223.66.

At the open market, the buying and selling of the dollar was recorded at Rs228.75 and Rs231 at 4:45pm PST.

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