KARACHI: Due to increasing dollar demand for import and corporate payments before the end of the year, the fluctuating exchange rate is projected to persist next week.
On December 17, 2021, the rupee reached an all-time low of Rs178.04. Despite strong steps implemented by the State Bank of Pakistan (SBP) to dramatically hike the policy rate, the local currency lost 33 paisas, or 0.2 percent, during the week.
Dealers feel that the demand for foreign currency was significantly higher than the regulator’s controls.
The Saudi Fund for Development (SDF) deposit of $3 billion with the State Bank of Pakistan (SBP) also failed to boost the currency.
The Saudi Fund sent the funds to the Pakistani central bank last week, helping to boost the country’s official foreign currency reserves.
According to the most recent foreign currency figures, reserves fell by $123 million to $25.028 billion in the week ending December 10, 2021. The SBP’s official reserves declined $90 million to $18.568 billion in the week ending December 10, 2021, down from $18.658 billion the previous week.
Meanwhile, the high import bill posed a significant threat to the rupee’s stability. During the first five months (July-November) of fiscal year 2021-22, the import bill grew by 69.17 percent to $32.93 billion, up from $19.47 billion in the previous fiscal year.
The enormous trade gap was compounded by the soaring import cost. The trade imbalance grew 112% to $20.59 billion in the first five months of this fiscal year, compared to $9.72 billion the previous year.
Foreign inflows, likewise, are insufficient to fulfil the need for external payments.
The country’s exports increased by 27% to $12.34 billion in the first five months of the current fiscal year, compared to $9.74 billion in the same time the previous fiscal year.
Meanwhile, as compared to the previous month, the inflows of foreign remittances sent by Pakistanis living abroad decreased in November 2021. In November 2021, remittances were $2.352 billion, up from $2.517 billion in October 2021.
Since the start of the current fiscal year, the rupee has been under pressure. From a low of Rs157.54 on June 30, 2021 to a high of Rs178.04 on December 17, 2021, the local currency decreased Rs20.50, or 13.01 percent.