Rupee falls 27 paisas on depleting forex reserves

KARACHI: The rupee fell another 27 paisas against the dollar on Monday, owing to a sharp decline in the foreign exchange reserves, dealers said.

The local currency fell to Rs227.41 against the dollar from last Friday’s closing of 227.14 in the interbank foreign exchange market.

The dealers said last week the repayment by the government against foreign debt further pressured the rupee value.
The dealers said the official foreign exchange reserves had fallen to an alarming level.

Pakistan’s official foreign exchange reserves fell to an alarming level of $5.57 billion by the week ended December 30, 2023. The official foreign exchange reserves of the State Bank of Pakistan (SBP) fell $245 million to $5.577 billion by the week ended December 30, 2022, compared with $5.822 billion a week ago, ie, December 23, 2022.

The current level of the official forex reserves have created a default-like situation, as the country maybe unable to pay for foreign trade in the coming days.

The import bill of the country for December 2022 was recorded at $5.16 billion, according to the Pakistan Bureau of Statistics.

This shows the official foreign exchange reserves of the country have the capacity to provide import cover for only 1.2 months. The benchmark foreign exchange reserves of the central bank should be at a level to provide three months import cover.

The dealers said the higher demand for import payments and scarcity of the dollars kept the pressure on the local currency.

Recently, the State Bank of Pakistan withdrew the condition of prior approval to open the letters of credit (LCs) by banks for import proceeds.

However, sources in the banking sector said the commercial banks were opening LCs only on the basis of inflows received under the export receipts and foreign remittances.