Large imports remain threat to rupee stability
KARACHI: Large import bill remains a threat to the rupee stability next week, as the imports during the first quarter of the current fiscal year registered a phenomenal growth of 65 per cent, compared with the corresponding quarter of the last fiscal year.
However, measures taken by the State Bank of Pakistan (SBP) may help the local unit recover losses against the dollar.
The local currency during the last few weeks remained under pressure and made fresh lows against the greenback. The rupee fell to the all-time low at Rs170.96 against the dollar on October 6, 2021 in the interbank foreign exchange market.
It remained under pressure since the start of the current fiscal year, as the rupee lost Rs12.99, or 8.24 per cent, against the foreign currency since the closing of June 30, 2021, compared with the latest closing of Rs170.53 on October 8, 2021.
The import bill of the country surged to $18.63 billion during the first quarter (July–September) of 2021/22, compared with $11.28 billion in the corresponding quarter of the last fiscal year.
To discourage import of non-essential and luxury items, the central bank took several measures during the last few days.
In the latest measures, the SBP on October 6, 2021 imposed a ban on carrying above $1,000 by passengers travelling to Afghanistan. Further, each traveller is allowed to carry a maximum of $6,000 in a year.
Besides, the exchange companies have been directed to conduct biometric verification for all foreign currency sale transactions equivalent to $500 and above and outward remittances.
The State Bank also issues instructions to the exchange companies to sell the cash foreign currency and make outward remittances, equivalent to $10,000 and above, against the receipt of funds through cheque or banking channels only.
These measures helped the rupee recover 34 paisas against the dollar in the remaining two days of the outgoing week, as the exchange rate ended at Rs170.53 against the greenback on October 8, 2021.
Prior to the latest action, the SBP on September 30, 2021 imposed a 100 per cent cash margin requirement on import of additional 114 items to discourage external payments.
On September 23, 2021, it imposed a ban on bank financing for imported vehicles; however, these measures failed to help the local currency and it continued to depreciate against the dollar.
Market sources said the government should check the trend of imports, which were made during the first quarter. There is a need to impose restrictions through regulatory measures to curb the import of unnecessary items.
Besides, the country needs to enhance inflows of the foreign currency in the shape of exports and home remittances.
The overseas Pakistanis have sent $8 billion during the first quarter of the current fiscal year, which is 12.5 per cent higher, compared with the inflows in the corresponding quarter of the last fiscal year.
Similarly, the exports registered 27 per cent growth to $6.97 billion during July–September 2021, compared with $5.47 billion in the corresponding period of the last fiscal year.
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