Sunday Mar 28, 2021
KARACHI: In the hope of financial assistance commitments made from multilateral institutions to help boost the country’s foreign exchange reserves, experts expect the Pakistani rupee to appreciate slightly in the coming weeks.
According to a report published in The News, the development is also expected because of the inflows from the Pakistani diaspora in the shape of remittances.
The rupee closed at 154.59 against the dollar on Friday. It appreciated 0.88% on a week-on-week basis and 2.22% month-on-month against the greenback.
After the completion of the second to fifth reviews of Pakistan’s $6 billion worth Extended Fund Facility by the IMF Executive Board and release of funding by other multilateral institutions, the rupee gained significantly, breaching below 155 levels in the last trading session of the week.
In this regard, a foreign exchange dealer at a leading commercial bank said: “I think we should see the rupee range-bound or strengthen a bit in the coming sessions because of strong supplies, amid surging workers’ remittances and continued higher inflows into Roshan Digital Account."
More dollar inflows are expected during Ramazan and Eid-ul-Fitr, which also present a positive outlook for the rupee in the next few months.
“We see 154.40 per dollar as a support level for the rupee in the coming week,” he added.
Apart from these positive triggers, traders agreed that the future course of the Pakistani rupee would depend on the forex strategy of the central bank.
Traders believe the rally in the Pakistani rupee will not diminish unless the State Bank of Pakistan steps in and starts buying dollars.
Some analysts expect the SBP’s intervention in the market sooner than later, owing to an anticipated increase in the Real Effective Exchange Rate (REER). They estimate REER to be over 100.
Analysts also fear the country’s exports may face some setbacks due to the coronavirus-related lockdown in Europe. Moreover, Special Convertible Rupee Accounts’ flows haven’t been increased this month and they posted an outflow of $9 million.
Moreover, the country is likely to have debt repayments of around $3 billion by the end of this fiscal year.
The country is looking to raise approximately $2 billion from international markets in the coming months.
In a positive sign, Pakistan’s foreign exchange reserves increased 1.36% to $20.434 billion in the week ended March 19.