Rupee further recovers against dollar on Chinese inflows

KARACHI: The rupee continued to gain against the dollar on Thursday on the expected inflows from China to shore up the country’s foreign exchange reserves, dealers said.

The rupee gained 97 paisas to close at Rs260.93 against the greenback from the previous day’s closing of Rs261.90 in the interbank foreign exchange market.

The dealers said the local currency responded positively after the reports of Chinese inflows, which would help increase the foreign exchange reserves.

On Wednesday, Finance Minister Ishaq Dar said that the China Development Bank (CDB) has approved a loan of $700 million for Pakistan.

“The formalities have been completed and the CDB board has approved the facility of $700 million for Pakistan. This amount is expected to be received this week by the State Bank of Pakistan (SBP), which will shore up its foreign exchange reserves,” according to a Tweet of the finance minister.

The local currency recorded a historic low of Rs276.58 against the dollar on February 3, 2023. However, after touching the lowest level, it recovered 5.66 per cent, or Rs15.65, against the greenback till the end of the market on February 23, 2023.

The dealers were of the view that the market was also anticipating successful negotiations between the local authorities and the International Monetary Fund (IMF), which would pave the way for the release of $1.2 billion tranche.

They also said the IMF’s approval of the tranche under the Extended Fund Facility (EFF) would also open doors for inflows from other friendly countries.

The local currency is under significant pressure due to a massive fall in the foreign exchange reserves.

The official foreign exchange reserves of the central bank stood at $3.192 million by the week ended February 10, 2023. The current level of the official foreign exchange reserves are only to provide import cover for around two weeks, or 19 days.

Similarly, 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 SBP’s official forex reserves were at $3.19 billion in February 2014.

The foreign exchange reserves held by the central bank witnessed a record high of $20.146 billion by the week ended August 27, 2021. Since then, these have declined by $16.954 billion.

Also Read

Bulls continue to dominate Pakistan equity market

KARACHI: The Pakistan Stock Exchange (PSX) continued to remain positive and sequentially...