Sunday Oct 10, 2021
Analysts have said the Pakistani rupee is expected to stay range-bound next week, as recent measures taken by the State Bank of Pakistan (SBP) have triggered expectations of the currency stabilising in the coming days.
The rupee hit an all-time weakest level of 170.96 before paring losses as persistent higher dollar demand for import payments, the rising import bill, skyrocketing commodity prices, and widening current account deficit put pressure on the domestic currency.
The rupee further suffered losses due to the outflow of the US dollar from Pakistan to Afghanistan, creating a shortage in demand of the greenback in Pakistan.
Meanwhile, actions of the State Bank of Pakistan (SBP) eased pressure on the rupee as it placed some curbs on the unwanted outflow of foreign currency. The rupee closed at 170.53 per dollar on Friday.
“I anticipate we will see some sluggish activity on the demand side, and inflows are likely to balance the demand for the US currency from manufacturing and oil importers,” said a foreign exchange trader at a commercial bank.
However, the rally in the global commodity prices could exert pressure on the rupee, he added.
The global commodity index had been the highest in the last 25 years.
"The range for the rupee should be 170-71 in the coming week."
Currency dealers said the central bank will be concerned if the rupee breaches the 171 barrier, adding that it was resulting in higher prices of food products, general inflation and people paying more for imports.
Analysts said the future course of the rupee would rely on the resumption of the International Monetary Fund (IMF) programme. The government wants to come up with the most favourable terms in the current circumstances, as it is eager to successfully complete the sixth review of the $6 billion Extended Fund Facility.
High-level discussions with the IMF will be concluded next week.
However, not all news was bad for the economy this week. Reports indicated that the money sent home by overseas Pakistani workers rose 12% to $8 billion in the first quarter of the current fiscal year.
Remittances are expected to increase to $30 billion in FY2022 to become the largest source of foreign currency, according to analysts.
"If the first-quarter trend persists, Pakistan remittances could hit the figure of $32 billion during the current financial year. This contributes significantly to countering external pressure on the balance of payment," according to the Trust Securities and Brokerage Limited.
Remittances remained above $2 billion since June 2020. The central bank said this is also the seventh consecutive month that inflows were around $2.7 billion on average. Pakistan received record $29.4 billion remittances during the financial year 2020-21 compared to $23 billion it received during the financial year 2019-20. The government expects $31 billion in remittances for the present fiscal year of 2021-22.
Originally published in The News