On March 29, 2023, Pakistani rupee (PKR) ended with a decline of 37 paisas against the US dollar in interbank foreign exchange market.
The exchange rate ended at PKR 283.92 to the dollar from previous day’s closing of PKR 283.55 in the interbank foreign exchange market.
Current experts said that dollar demand increased during the day due to import and corporate payments. Besides, the delay in inflows under IMF program also pressured the local currency;
It is worth noting that the exchange rate had previously strengthened against the dollar due to a significant contraction in the current account deficit.
Pakistan’s current account deficit narrowed by 313 per cent during first eight months (July – February) 2022/2023, official data revealed a day earlier.
According to the State Bank of Pakistan (SBP), the current account deficit recorded at $3.86 billion during the first eight months of the present fiscal year as compared with the deficit of $12.08 billion in the corresponding period of the last fiscal year.
The experts said that the lack of inflows however kept the rupee under pressure.
Exports have decreased by 8.65 per cent to $18.79 billion during first eight months (July – February) of the current fiscal year when compared with $20.57 billion in the corresponding period of the last fiscal year.
Meanwhile, inflows of workers’ remittances recorded a decline of 11 per cent in eight months (July – February) of fiscal year 2022-2023.
The overseas Pakistani workers sent $17.99 billion during first eight months of the current fiscal year as compared with $20.18 billion in the corresponding months of the last fiscal year.
The local unit is facing a continuous pressure since past few years due to challenges to the economy and uncertain political conditions.
The rupee hit the all-time low of PKR 285.09 on March 02, 2023.
The decline in rupee value may also be attributed to depleting foreign exchange reserves.
Pakistan’s weekly foreign exchange reserves moved by $93 million by week ended March 10, 2023. The foreign exchange reserves of the country increased to $9.847 billion by week ended March 10, 2023 when compared with $9.754 billion a week ago i.e. March 03, 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 $17.381 billion.
On the other hand, the official reserves of the SBP increased $18 million to $4.319 billion by week ended March 10, 2023 when compared with $4.301 billion a week ago.
Foreign exchange reserves of the SBP have been increased to a level for providing more than one month import cover.
After many week the official reserves of the central crossed one month import cover. The import bill of the country during the month of February 2023 was recorded at $4 billion.
Ideally a central bank should have a level of foreign exchange reserves that is equal to three-month of import payment by a country.
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 $15.827 billion.