KARACHI: The planned inflows under the Saudi assistance package next week may help ease rupee volatility.
According to the government authorities, the Saudi support of $3 billion would be transferred directly to the State Bank of Pakistan (SBP) next week.
Saudi Arabia on October 26, 2021 announced to support Pakistan in managing its balance of payments position by transferring $3 billion to the central bank.
Pakistan’s current account recorded a deficit of $5.08 billion during the first four months (July-October) 2021, compared with a surplus of $1.31 billion in the corresponding period of the last year. Similarly, the current account deficit widened to $1.66 billion in October 2021, compared with a surplus of $448 million in the same month of the last year.
The ballooning current account deficit may be attributed to the large imports during the period. The country’s import bill surged 65 per cent to $25.1 billion during the first four months of the current fiscal year, compared with $15.17 billion in the corresponding period of the last fiscal year. The significant increase in the import bill also created a massive trade gap. The trade deficit for the period under review widened 106 per cent to $15.64 billion as against the deficit of $7.6 billion during July-October of 2020/21.
The rupee remained volatile during the outgoing week. The local currency recovered value against the dollar during the first three days, owing to the tightening of the monetary policy by the central bank and the finalisation of the release of the International Monetary Fund (IMF) tranche for Pakistan.
The State Bank in its policy statement on November 19, 2021 announced a significant rise of 150 basis points to 8.75 per cent in the key policy rate.
However, uncertainty over the transfer of funds from Saudi Arabia and the dollar demand for large import payments resulted in deterioration in the rupee value in the remaining last two days.
The local currency on the last day of the week hit a historic low of Rs176.50 during intraday. However, it settled at Rs175.46 against the greenback in the interbank foreign exchange market.
It remained under pressure since the start of the current fiscal year. The local currency fell Rs17.92, or 11.37 per cent, from June 30, 2021 closing of Rs157.54 to the closing of Rs175.46 on November 26, 2021.
The local unit hit the all-time low of Rs175.73 against the dollar on November 12, 2021 in the interbank foreign exchange market.
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