Rupee likely to fall further next week

KARACHI: The rupee is likely to decline further against the dollar next week, owing to an alarmingly low level of the foreign exchange reserves, amid reduced inflows, dealers said.

With no inflows in sight from friendly countries and multilateral institutions, Pakistan is facing a balance of payments crisis due to narrowing foreign exchange reserves.

The local unit shed 61 paisas to reach Rs226.43 on Friday, against the closing of Rs225.82 on December 26, 2022 in the interbank foreign exchange market.

The country will have to repay approximately $8.3 billion in the shape of external debt servicing over the next three months (January-March) of the current fiscal year.

The foreign exchange reserves of the State Bank of Pakistan (SBP) fell $294 million to reach $5.82 billion during the week ended December 23, compared with $6.11 billion on December 16.

According to the central bank, the decline was recorded due to the external debt repayment.

However, the net foreign exchange reserves held by the commercial banks increased $2 million to $5.88 billion. The total liquid forex reserves held by the country went down $292 million to stand at $11.70 billion during the week.

The greenback has almost vanished from the open market over the last couple of months, as the grey market has emerged due to the shortage of the dollar.

The significant difference in the rates between the interbank and the grey market had already started affecting the remittances coming through official banking channels with the inflows witnessing a falling trend. The workers’ remittances fell 14.3 per cent to clock-in at $2.10 billion in November, compared with $2.460 billion in the same month of the previous year on the back of inflows through illegal channels such as hawala and hundi.

The workers’ remittances also showed a decline of almost 5 per cent in November, compared with October, when it stood at $2.21 billion.

According to dealers, the pressure on the Pakistani currency is also being exerted by the smuggling of the dollars to Afghanistan, as around $2 billion leaves Pakistan for Afghanistan every month through smuggling, misuse of Afghan transit trade and border crossings, putting a strain on Pakistan’s foreign exchange reserves.

Pakistan’s economic condition is in distress, as the negotiations with the International Monetary Fund (IMF) have stalled for the ninth review of the Extended Fund Facility (EFF).

As the IMF programme remains in jeopardy, Pakistan is finding it difficult to secure funds from friendly countries to boost its foreign exchange reserves.

Although Saudi Arabia provided a much-needed breathing space to Pakistan by announcing the rollover of $3 billion on December 2, the country needs fresh inflows to meet its future obligations in the shape of debt repayments and consistent supply of the dollars in the market to cater to the needs of the export-oriented industries.

The current account deficit declined over 85 per cent on a year-on-year basis to clock-in at $0.28 billion in November, as the imports have reduced.

Experts said the exports declined even further due to delays in the opening of letters of credit (LCs) to import raw materials for the export-oriented industries.

According to the data released by the Pakistan Bureau of Statistics (PBS), the exports fell to $2.37 billion in November, compared with $2.9 billion in the same month of the last year.