Rupee likely to remain under pressure next week

KARACHI: Large import bill and a significant decline in the foreign exchange reserves may further destabilise the rupee next week, dealers said.

The higher import bill and a decline in the forex reserves have deteriorated the value of the local unit to the historic low of Rs176.77 against the dollar on December 3, 2021.

The official reserves of the State Bank of Pakistan fell $244 million to $16.01 billion by the week ended November 26, 2021, compared with $16.254 billion a week ago.

Analysts at Topline Securities said that with imports of around $8 billion in a month, the import cover has reduced to two months as against 3.3 months in August 2021.

The import bill surged 83 per cent to $7.85 billion in November 2021, compared with $4.29 billion in the same months of the last year.

The cumulative increase in the import bill recorded 69 per cent to $32.934 billion during the first five months (July-November) 2021/22, compared with $19.46 billion in the corresponding months of the last fiscal year.

The large imports have resulted in widening of the trade deficit. The trade deficit during the months under review widened 112 per cent to $20.59 billion, compared with the deficit of $9.72 billion in the corresponding period of the last fiscal year.

The foreign inflows under various heads failed to support the rupee. Meanwhile, expected inflows from Saudi Arabia and the International Monetary Fund (IMF) were not materialised so far.

Pakistan is likely to receive $3 billion from Saudi Arabia in the coming days as the State Bank of Pakistan (SBP) and Saudi Development Fund (SDF) signed an agreement, in this regard, on November 29, 2021.

Further, an amount of above $1 billion as the IMF tranche is expected next month subject to meeting conditions by the government.

The exports of the country recorded a growth of 27 per cent to $12.34 billion during the first five months of the current fiscal year, compared with $9.74 billion in the corresponding period of the last fiscal year.

Meanwhile, the inflows of foreign remittances sent by the overseas Pakistani workers have recorded a decline in October 2021, compared with the inflows in the previous month. The inflows of remittances were $2.517 billion in October 2021, compared with the inflows of $2.67 billion in September 2021.

The rupee remained under pressure since the start of the current fiscal year. The local currency fell Rs19.23, or 12.21 per cent, from June 30, 2021 closing of Rs157.54 to the closing of Rs176.77 on December 3, 2021.

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