The rupee is expected to remain under pressure next week as uncertainty might persist regarding on-going political turmoil and negotiations with IMF on resumption of financial programme, traders said.
The local unit faced continued pressure during the outgoing week. It started the week at 180.57 levels against the dollar and ended at Rs181.78 on Friday.
Political uncertainty, deadlock over conclusion of talks with the International Monetary Fund (IMF), and depleting foreign exchange reserves of the country had had negative bearing for the rupee against dollar.
Currency dealers and analysts anticipated that the domestic currency would remain under pressure in coming weeks. They doubted any correction in the value of the local currency in near future, after it shed massively recently reaching all-time low.
Analysts said relief package and amnesty scheme for the industrial sector were stumbling block in way of early conclusion of talks between Pakistan and IMF.
They added that delay in conclusion of talks with IMF had put brakes on foreign funding from other multilateral institutions. “The institutions were eyeing what would be the ultimate outcome of the talks.”
They stated that import bill was a big source of concern as it had widened current account deficit of the country. The current account deficit shrank in February on month-on-month basis, however, it has broadened year-on-year basis.
“The imports are coming unchecked in the country, which are consuming huge foreign exchange and the rising prices of energy and commodities are draining more dollars out of the country,” they said.
Country’s foreign currency reserves hit their lowest level of the current fiscal year. The foreign exchange reserves declined by $844 million during the week ended March 18, the State Bank of Pakistan (SBP) said. The foreign reserve assets dropped to $21.439 billion, lowest since mid-March last year.
The SBP reserves decreased by $869 million to $14,962.4 billion on external debt and other payments, the bank said. The reserves of commercial banks rose to $6.477 billion from $6.451 billion.
The current account deficit declined 78 percent to $545 million in February from $2.531 billion a month ago.
However, the deficit widened steeply on a year-on-year basis as it stood at $34 million in February 2021. During the first 8 months of FY22, the CAD crossed the $12 billion.
The downward trend of foreign exchange pile heightens risks for a country meeting its forthcoming overseas as debt repayment. According to international benchmark, forex reserves of a country should be sufficient to cover three months of its imports. At present, Pakistan’s reserves probably cover around 2.2 months of imports.