KARACHI: The value of US dollar on Friday recorded a high of Rs 130.10 in interbank against domestic unit after an increase of 1.35 in a single day.
The country has been left with hardly two-month import bill payments, as forex reserves with State Bank of Pakistan stand at around $9.48 billion. Commercial banks have around $6 billion forex reserves in hand.
The dollar also put pressure on local currency, as availability of a dollar touched mark of Rs 129.85 in the open market transaction, currency dealers said.
The local currency’s continued downward rally against dollar is largely due to higher interest rate on loans acquired from international donors, according to currency experts. The private sector exchange companies, however, blame commercial banks for not supplying them adequate dollars to meet their public demand, which in result has enhanced the value of dollar against rupee in the open market.
A member of the Exchange Companies Association said the situation has already been brought into the notice of the Ministry of Finance. “The officials of the ministry have assured us that dollar supply situation will improve in couple of days,” he claimed.
It appears that the official open market rate of rupee against US dollar would settle between Rs 129 and Rs 130 in next couple of months, opined currency experts.
Another factor contributing to local currency’s downward rally is Pakistan meeting all prior conditions of IMF to qualify for bailout loans.
One of the major reasons is higher demand of greenback for oil purchase payments and import bills payments, which stand around $245 million.
The import of petroleum products and edible oil becomes costlier whenever rupee depreciates. Besides the import of material for value addition makes an impact on cost of production of major sectors like textile, leather and surgical goods.
Pakistan would possibly face a 6.3% increase in value of international loans repayment due to dollar-rupee parity in more than 24 months till 2018.
Fazal Ahmad, a currency expert in Houston, said a 71 percent plus depreciation of rupee against dollar has been noticed so far. Rupee is also under pressure due to the fact that SBP is not taking interest in foreign exchange market on the directions of IMF and the exchange rate mechanism now depends on supply and demand position.
A possible way out for the government is to securitise monetary remittances by Pakistanis working abroad which could shore up government’s fiscal position, enabling it to halt rupee’s slide and restore confidence in the currency.
The real test, however, will be in the October-November quantitative targets, in which both SBP forex reserves target and government borrowing ceiling from SBP are quite ambitious.
Published in Daily Times, July 21st 2018.