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Global oil prices may control Pakistani rupee’s fate

Global oil prices may control Pakistani rupee’s fate

Global oil prices may control Pakistani rupee’s fate
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KARACHI: The Pakistan rupee’s stability is linked with the international oil prices and the demand for the dollars for export payments next week, as the foreign exchange reserves of the country is on the decline, analysts said.

The international oil prices are on the rise for the last couple of days, while the external payments are reducing Pakistan’s foreign exchange reserves.

The rupee ended the year 2021 with a sharp recovery to Rs176.51 from the all-time low of Rs178.24 against the greenback on December 29, 2021. During the outgoing week (January 3 to January 7, 2022), the rupee ended at Rs176.67 against the dollar.

During the last few days, the international oil prices are continuously rising, despite a surge in the Omicron cases in Europe and Americas. The rate of Brent crude climbed up to over $82/barrel during Friday trade.

Meanwhile, the foreign exchange of the country witnessed a decline. Pakistan’s foreign exchange reserves declined $255 million to $24.019 billion by the week ended December 31, 2021, compared with $24.274 billion.

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The official foreign exchange reserves of the central bank fell $170 million to $17.686 billion by the week ended December 31, 2021, compared with $17.856 billion a week ago.

However, the ease in the monthly import payments and import restrictions introduced through the Finance (Supplementary) Bill, 2021 may help the local currency to stabilise.

The import bill for December 2021 decline 4 per cent to $7.59 billion from $7.9 billion in November 2021. However, the overall import bill for the first half (July-December) 2021/22 is still very high.

The import bill of the country surged 66 per cent to $40.58 billion during the first half of the current fiscal year, compared with $24.45 billion in the corresponding half of the last fiscal year.

The rise in the import bill will also impact the balance of payments position. Pakistan’s current account deficit widened to $7.1 billion during the five months (July-November 2021/22), compared with the current account surplus of $1.87 billion in the corresponding period of the last fiscal year.

The government introduced the Finance (Supplementary) Bill, 2021 in the last week of December 2021. The bill proposed withdrawal of tax exemptions worth Rs343 billion. The government claimed that the exemptions were withdrawn on imported goods, especially on non-essential and luxury items.

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