Rupee to stay under pressure on high external payments
KARACHI: The local currency is likely to stay under pressure next week due to large external payments, dealers said on Saturday.
The local unit is depreciating and making fresh lows against the dollar on a daily basis.
The rupee fell to an all-time low of Rs171.20 against the dollar on October 14, 2021 in the interbank foreign exchange market. The local unit recorded a decline of Rs13.26, or 8.02 per cent, against the greenback since the closing of June 30, 2021, compared with the closing of Rs170.18 on October 15, 2021.
The import bill of the country recorded an increase of 66.11 per cent during the first quarter (July–September) 2021. The country spent foreign exchange of $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.
Similarly, the import of CBU (Completely Built Unit) cars registered 144 per cent growth to $95.52 million during July–September 2021, compared with $39.15 million in the same period of the last year.
The import of Completely Knocked Down (CKD) cars registered 226 per cent growth to $407.48 million during the quarter under review, compared with $124.78 million in the same quarter of the last year.
To discourage import of non-essential and luxury items, the State Bank of Pakistan (SBP) took several measures during the last few days. In the latest measures, the SBP on October 6, 2021 imposed a ban on taking out over $1,000 by passengers travelling to Afghanistan.
Further, each traveller is allowed to take out 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 SBP 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.
Prior to the latest action, the SBP on September 30, 2021, imposed a 100 per cent cash margin requirement on the import of additional 114 items to discourage external payments. The central bank on September 23, 2021 imposed a ban on bank financing for imported vehicles. However, these measures failed to help the local currency and it continued depreciation against the dollar.
The government needs to check the imports of non-essential and luxury finished products to save foreign exchange and support the local currency from further depreciation.
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