KARACHI: US Dollar on Wednesday jumped against the Pakistan Rupee (PKR) to reach PKR 279.12 in interbank foreign exchange market.
The exchange rate witnessed weakness in rupee value by PKR 1.26 to end at PKR 279.12 to the dollar from previous day’s closing of PKR 277.87 in the interbank foreign exchange market.
READ MORE: Rupee shows resilience against dollar to end at PKR 277.87
Currency experts said that the dollar demand was increased significantly during the day for import and corporate payments.
They said that the ahead of holy month of Ramaza the import of commodity and relevant goods was seen increasing.
It is important to note that the local currency recorded the all-time low of PKR 285.09 against the dollar on March 02, 2023.
Previously, the local currency witnessed appreciation against the greenback due to inflows from China.
The Finance Minister, Ishaq Dar in a tweet last week stated that ICBC has approved the rollover of $1.3 billion facility, which will be disbursed in three instalments.
READ MORE: Rupee inches up against dollar to end at PKR 277.92
The inflows of dollars from Chinese loan will eventually help the local currency to stabilize and strengthen against dollar.
The local currency recorded a massive decline following a rating agency downgraded the country’s currency rating.
Moody’s Investors Service downgraded the Government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa3 from Caa1.
Moody’s has also downgraded the rating for the senior unsecured MTN program to Caa3 from Caa1. Concurrently, Moody’s has also changed the outlook to stable from negative.
The decision to downgrade the ratings is driven by Moody’s assessment that Pakistan’s increasingly fragile liquidity and external position significantly raises default risks to a level consistent with a Caa3 rating.
READ MORE: Pakistani rupee witnesses highly volatile week, uncertainty to continue
In particular, the country’s foreign exchange reserves have fallen to extremely low levels, far lower than necessary to cover its imports needs and external debt obligations over the immediate and medium term.
Total foreign exchange reserves of the country improved by $542 million to $9.268 billion by the week ended February 24, 2023. The total foreign exchange reserves of the country were $8.726 billion a week ago i.e. February 17, 2023.
The country’s foreign exchange reserves hit an all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $17.96 billion.
READ MORE: Rupee makes historic low against dollar at PKR 285.09
The official foreign exchange reserves of the central bank also increased by $556 million to $3.814 billion by the week ended February 24, 2023 as compared with $3.258 billion a week ago.
The central bank attributed the improvement in the foreign exchange reserves to inflows of $700 million from China.
The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by the week ended August 27, 2021. Since then the official reserves of the SBP dropped by $16.332 billion.
