Rupee likely to stay under pressure on external payments, high oil prices

Shahnawaz Akhter Web Editor

23rd Oct, 2021. 04:02 pm

A currency exchange dealer holds $100 bills in his hand. Photo: Athar Khan/Bol News

KARACHI: The rupee is likely to stay under pressure next week due to bulk external payments and expected rise in the international oil prices.

The rupee ended the week with a record low of Rs174 against the dollar. The local currency fell Rs2.82, or 1.65 per cent, during the outgoing week. The exchange rate ended at Rs171.18 on October 15, 2021 to close the week at Rs174.

The rupee/dollar parity remained volatile since the start of the current fiscal year. The local unit lost value of Rs16.46, or 10.45 per cent, from Rs157.54 on June 30, 2021 to the closing of Rs174 on October 22, 2021.

The local currency may come under pressure next week, owing to the recent repayment of $1.646 billion by the State Bank of Pakistan (SBP). The official foreign exchange reserves of the State Bank recorded a decline of $1.646 billion to $17.492 billion by the week ended October 15, 2021, compared with $19.138 billion by the week ended October 8, 2021.

The State Bank of Pakistan attributed the decline in the foreign exchange reserves to external debt repayments, including the repayment of $1 billion against Pakistan International Sukuk.

The import bill of the country recorded an increase of 66.11 per cent during the first quarter (July–September) 2021. The country has spent foreign exchange worth $18.75 billion during the first quarter of the current fiscal year, compared with $11.28 billion in the corresponding quarter of the last fiscal year.

The oil import bill is the major reason for the massive depreciation in the local currency. The oil import bill registered a phenomenal growth of 97 per cent to $4.59 billion during the first quarter of the current fiscal year, compared with $2.33 billion in the corresponding quarter of the last fiscal year.

Reports are suggesting that the international oil prices may rise in future. Some are forecasting the oil at $100/barrel in the coming days.

The surge in import bill has also significantly widened the current account deficit.

According to the balance of payments data released by the central bank, the current account deficit of the country was recorded at $3.4 billion for the first quarter (July–September) of the current fiscal year, compared with the current account surplus of $865 million in the corresponding quarter of the last fiscal year.