Currency update: Rupee expected to remain stable this week

• Pakistani rupee expected to remain stable against US dollar in this week, say analysts.
• "We see some support for rupee from improvement in foreign exchange liquidity in market," says forex trader.
• Market waiting to see when IMF board meets to consider Pakistan’s request for completion of sixth review, says trader. 

KARACHI: Drawing support from inflows from exporters with market participants anticipating lower import payments, the Pakistani rupee is expected to remain stable against the US dollar this week, say analysts.

During the outgoing week, the local unite stayed stable while trading at the 176 level versus the greenback. It closed at 176.74 to the dollar on the first trading day of 2022 (Tuesday) and ended at 176.67 on Friday, The News reported. 

A forex trader said, “We see some support for the rupee from the improvement in the foreign exchange liquidity in the market as the exporters start selling dollars. We also expect the importer demand to remain in check in the days to come.”

Last week, the central bank took an important step to improve the supply of inflows in the market. It asked exporters to bring in proceeds within 120 days instead of 180 days. Inflows received from overseas Pakistanis through Roshan Digital Account crossed a $3 billion mark, reaching $3.16 billion as of December 31, 2021.

However, the investors were concerned about an unprecedented rise in imports and depletion in the forex reserves. The country’s trade deficit widened by a whopping 106% to $25.478 billion in the first half of this fiscal year owing to a significant increase in imports. Total imports jumped by 66% to $40.50 billion. However, exports during July-December also increased by 25% to $15.13 billion.

The country’s forex reserves fell to $24.02 billion as of Dec 31 from $24.27 billion a week earlier. The reserves held by the State Bank of Pakistan (SBP) declined by $169 million to $17.686 billion. The International Monetary Fund (IMF)’s approval for the resumption of its $6 billion loan programme seems to be a major trigger for the rupee in the near term as it is expected to unlock financing from the multilateral lenders and the bond issuance in the international market.

“The market awaits IMF’s nod for the disbursement of the $1 billion tranche under the extended fund facility,” said another trader.

“The market is waiting to see when the IMF executive board meets to consider Pakistan’s request for the completion of the sixth review that will pave the way for the release of the next installment,” he added.

The government said the IMF board will meet after Islamabad has met the prior conditions needed for the clearance of the sixth review. The government tabled the Finance (Supplementary) Bill and the State Bank of Pakistan (SBP) Amendment Bill, 2021 in the parliament as prior conditions imposed by the Fund for the revival of the loan facility.