Dollar slips to Rs264.38 on taxation measures taken through mini-budget

KARACHI: The rupee continued its gaining momentum on Thursday, owing to harsh taxation measures taken by the government through the mini-budget, dealers said.

The local currency gained Re1 to close at Rs264.38 against the greenback from the previous day’s closing of Rs265.38 in the interbank foreign exchange market.

The local unit recovered Rs12, or 4.41 per cent, after hitting the all-time low of Rs276.58 on February 3, 2023.

Experts said the foreign currency market positively responded to the government measures taken through the Finance (Supplementary) Bill, 2023.

The measures to enhance the sales tax on imports would discourage the demand for the imported goods in the country and save the foreign exchange.

Further, the government had already increased the electricity and gas tariffs.

These measures not only will help the government avail the next IMF tranche of $1.2 billion but also curb the demand for imported goods.

The dealers said the falling exchange reserves and other foreign inflows remained the major threats to the stability of the local currency.

The overseas Pakistani workers have remitted around $16 billion to their homeland during the first seven months (July-January) of the fiscal year 2022/23.

The inflows of remittances recorded an 11 per cent decline during the period under review, compared with $18 billion received in the corresponding period of the last fiscal year.

Besides, the foreign exchange reserves are also depleting massively. The official forex reserves of the State Bank of Pakistan (SBP) fell $169 million to $2.917 billion by the week ended February 3, 2023, compared with $3.086 billion a week ago on January 27, 2023.

The current level of the official foreign exchange reserves are only to provide import cover for around two weeks or 18 days.

The import bill for January 2023 has been recorded at $4.856 billion, as per the Pakistan Bureau of Statistics.

The benchmark foreign exchange reserves of a central bank should be at a level to provide three months of import cover.

The official foreign exchange reserves of the SBP fell sharply to an almost nine-year low. Previously, the official forex reserves of the central bank were seen at $3.87 billion in February 2014.

The foreign exchange reserves held by the SBP witnessed a record high of $20.146 billion by the week ended August 27, 2021. Since then, these have dropped by $17.229 billion.

Meanwhile, the exports also recorded a decline of 7.16 per cent to $16.47 billion during the period under review, compared with $17.74 billion in the same period of the last fiscal year.

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