Lockdown may ease pressure on rupee

KARACHI: A strict lockdown imposed by the Sindh government may discourage import payments and ease pressure on the rupee.

The Sindh government imposed a stringent lockdown to prevent the spread of the coronavirus from July 31, 2021. The restrictions may partially halt commercial and industrial activities in the province, especially in the port city of Karachi.

The provincial government has exempted export-oriented industries from the lockdown.

The lockdown may discourage importers to place fresh orders to their foreign sellers for raw materials and finished products. This will obviously reduce the demand for the foreign currency.

The rupee may get support from the expected inflows from the International Monetary Fund (IMF) in August 2021.

Besides, the economic uptick is visible as the tax collection of the Federal Board of Revenue (FBR) stood at Rs410 billion in July 2021, which is above the target of Rs342 billion.

However, concerns remain on the higher current account deficit on the back of a surge in import payments. The widening of the current account deficit in June 2021 indicated further rise in the external payments in subsequent months. This may depress the value of the local currency.

In the outgoing week, the rupee remained depressed, despite making some recovery. The exchange rate was at Rs162.32 against the dollar to start the week on July 26, 2021 and ended at Rs162.43 against the dollar on July 30, 2021. During the week, the local currency recovered to Rs161.23 on July 26, 2021.

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