Rupee makes sharp gains against dollar

KARACHI: The local currency made sharp gains of Rs2.10 against the dollar on Tuesday, despite a massive fall in the foreign inflows, including remittances and exports, dealers said.

The rupee closed at Rs267.34 against the greenback from the previous day’s closing of Rs269.44 in the interbank foreign exchange market.

The dealers said reportedly the government was against controlling the dollar to avoid further rupee depreciation.

The local currency hit the historic low of Rs276.58 on February 3, 2023 in the latest exchange rate crash.

Around five months back, the government put a cap on the dollar rate. However, it was lifted after the International Monetary Fund (IMF) pressured the authorities to allow the market forces determine the exchange rate.

Capping the dollar flourished the black market and discouraged inflows through formal channels. The workers remittances sharply declined due to the lower rate in the formal markets.

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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