Money market – Rupee expected to remain range-bound next week

The rupee is likely to remain range-bound next week, owing to narrowing foreign exchange reserves. However, any development on the inflows may lend some support to the local currency, dealers said.

The local unit failed to make any gains against the greenback during the outgoing week, as it shed 20 paisas to close at Rs227.14 on Friday against the closing of Rs226.94 on Tuesday January 3, in the interbank foreign exchange market.

The market remained closed on Monday, as the State Bank of Pakistan (SBP) observed a bank holiday.

The negotiations between Pakistan and the International Monetary Fund (IMF) remained stalled, owing to disagreement over the government’s fiscal policies.

Prime Minister Shehbaz Sharif on Friday said that a delegation from the IMF will visit Pakistan in two to three days to “undertake and complete” the ninth review of the loan programme.

The prime minister said that he talked to IMF Managing Director Kristalina Georgieva on Thursday and stressed that Pakistan will complete the IMF bailout programme.

The continuous depletion in the foreign exchange reserves of the country remained a major reason for the rupee’s downward momentum against the foreign currency.

The foreign exchange reserves held by the SBP fell $245 million to reach $5.57 billion during the week ended December 30, compared with $5.82 billion on December 23.

According to the central bank, the decline in the foreign exchange reserves came due to external debt repayment.

Overall, the liquid foreign exchange reserves held by the country, including the net forex reserves held by the commercial banks, stood at $11.42 billion. The net foreign exchange reserves held by the commercial banks amounted to $5.84 billion.

Pakistan’s trade deficit declined 32.65 per cent to $17.13 billion during the first half of the fiscal year 2023, compared with $25.43 billion during the same period of the last year, the data released by the Pakistan Bureau of Statistics (PBS) showed.

However, the exports also slumped for the fourth consecutive month in December 2022 to $2.3 billion, down 3.64 per cent, compared with the exports of $2.39 billion in November 2022.

During the first half of the fiscal year 2023, the exports were recorded at $14.24 billion against the exports of $15.12 billion during the same period of the last fiscal year, showing a decline of 5.79 per cent.

The fall in the workers’ remittances is another blow to the local economy, amid falling exports, as the country is facing the prospects of a likely sovereign default.

Remittances from overseas Pakistanis during November 2022 declined 14.3 per cent on a year-on-year basis, while the same declined 4.5 per cent on a month-on–month basis.

The remittances recorded an inflow of $2.1 billion in November, compared with the previous month when the figure was recorded at $2.2 billion,

With the cumulative inflows of $12 billion during July-November 2022, the remittances declined 9.77 per cent in the first five months of the fiscal year 2023, compared with the same period of the last year.