KARACHI: There has been probably administrative and information communication gap on part of State Bank of Pakistan (SBP) that has dragged down value of domestic currency versus greenback on last Wednesday but the fundamentals would never be changed and would remain stand intact on course.
In the open market the dollar increased by 3.50 paisas in a single trading session and closed above Rs 108.60 for buying in interbank against the rupee on Wednesday.
Whatever the remarks of economic managers of the country on this juncture, but facts speak truth on more than one count.
“Commercial banks were capable to arrange around $200 million or more in a day on emergency to keep the rupee value within its rim against the usual days’ normal transaction of around $100 million. But here lies fact that around five commercial banks are involved in this play”.
It is on record that private sector currency dealers had pumped foreign currency into the interbank market in order to salvage the rupee from possible huge depreciation, maintained currency dealers.
It is natural on back of falling foreign reserves, pressure on payment for opening licence of credit and high demand of dollar in the currency market can put pressure on rupee.
The import bills of crude oil, palm oil, industrial raw material and commodities are also one of the factors putting pressure on rupee.
Absence of foreign inflows in the economy and higher tendency in non- productive expenditures by the government on political grounds is also affecting rupee value downward, said currency expert Fazal Ahmad in Houston.
Inflationary conditions are still on higher side, as government is busy in minting money to cater to the need for circulating money worth billions and this is peril for the fragile economy, he added.
Government has already experienced current account deficit of $11 billion along with repayment of millions of dollar to international donors and on paying back interest amount.
The currency through printing equivalent or more than 2.5 percent of the gross domestic product in the absence of revenue generation resources from taxes and foreign aid is still damaging the very fibre of the economy.
It seems government wanted to bring the rupee value to Rs 120 against dollar in the next financial year or earlier which is putting pressure of macro-economic indicators, he added.
The borrowing was root cause putting pressure on macroeconomic stability and core inflation accelerated to 12 percent.
The country also witnessed fall in foreign exchange reserves, which were down to $17.4 billion from $17.8 in 11MFY 2016.
Lower income receipts, unwanted debt and borrowing from internal and external sources have also increased inflationary conditions in the country.
The economy of the country has been badly hit by huge government borrowing, power and gas crisis and uncertain political situation.
Average demand for the dollar remained above $75 million per day, while inflow remained at around $80 million per day.
SBB might also decide to let the rupee fall against the greenback to keep the exports of Pakistan competitive in the world market, said treasurers.
Similar was the trend in open market where the dollar increased by Rs 4 and closed at Rs 109.20 for buying versus domestic unit on July 5.
Published in Daily Times, July 9th , 2017.