ISLAMABAD: Pakistani rupee is expected to lose more value against US dollar and is likely to trade at Rs. 178-179 per dollar in days ahead, reports said.
“The rupee is likely to lose some more ground to the US dollar during the next week if the State Bank of Pakistan (SBP) will not take notice till the completion of sixth review of the International Monetary Fund’s (IMF) $6bn loan program”, the report reveals.
Because of higher demand for dollars from importers, particularly in the absence of inflows from the central bank and other sellers, the rupees will further suffer and more downfall.
In addition, a wide trade deficit caused by hefty imports and global oil prices were a threat to currency stability.
The rupee closed at a record low of 177.71 to the dollar on Friday. It depreciated by 0.69% during the outgoing week.
“There is still some demand pressure and that could let the rupee weaken further, unless there is liquidity intervention in the foreign exchange market. The rupee seems to be trading at 178-179 levels in days ahead,” said a currency dealer.
The SBP’s two important actions: increase in the cash reserves requirement for banks and a big hike in the interest rates last month hasn’t helped slow the domestic demand and inflation, and arrest the rupee’s free fall.
Pakistan and the IMF on November 21 reached a staff level agreement on policies and reforms needed to complete the sixth review under the Extended Fund Facility.
The country will secure a $1 billion tranche of the IMF funding once its board approves it was following the implementation of the prior actions, especially on fiscal and institutional reforms. The government is likely to present a mini budget before the Parliament soon to end all exemptions on sales tax to secure the IMF funding approval, Geo News reported.
The SBP’s Monetary Policy Committee is due to meet on Tuesday to review the economy and announce the interest rate decision. Analysts and markets expect the SBP to make a 100-150 basis points policy rate hike at its December 14 meeting, as it wants to combat a soaring current account deficit and increasing inflation.
Higher than expected imports in November and December, Temporary Economic Refinance Facility adjustments, repatriation of profits, interest and principal repayments will keep the rupee under pressure, and contribute to imported inflation, according to a client note from Tresmark.
Somehow the equation keeps going back to the IMF, and it becomes more critical every week for Pakistan’s economic stability.
Unfortunately, in a poll conducted by Tresmark, 21% responded that IMF loan resumption was ‘unlikely’, going up from 9% a week ago when staff level agreement was reported. “This change could be because of Pakistan’s recent stance on US’ ‘Democracy Summit’ and FO’s (Foreign Office) criticism of US for boycotting Beijing Olympics”.
It is hoped that based on Pakistan’s current vulnerability, Covid resurgence and the Afghanistan effect, saner minds will prevail.
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