KARACHI: Free fall in Pakistani Rupee (PKR) continued on Tuesday as the US dollar hit PKR 226.15 in interbank foreign exchange market.
The exchange rate recorded a decline of 33 paisas in rupee value to end at PKR 226.15 to the dollar from previous day’s closing of PKR 225.82 in the interbank foreign exchange market.
Currency experts said that significant fall in foreign exchange reserves and mounting dollar demand for import and corporate payment pressured the exchange rate.
READ MORE: Rupee depreciates to PKR 225.82 against dollar in interbank
The local currency witnessed a decline of 10.40 per cent since the start of the current fiscal year. The exchange rate was at PKR 204.85 at the start of the current fiscal year on July 01, 2022 and fell to the present level of PKR 226.15 to the dollar.
The official foreign exchange reserves of Pakistan reduced to provide about one month import cover.
The official foreign exchange reserves of the State Bank Pakistan (SBP) fell to $6.12 billion by week ended December 16, 2022. Whereas, the import bill of the country for the month of November 2022 was recorded at $5.18 billion, according to Pakistan Bureau of Statistics (PBS).
READ MORE: Rupee deteriorates on falling foreign exchange reserves
This shows the official foreign exchange reserves of the country have capacity to provide import cover for only 1.2 months. The benchmark foreign exchange reserves of a central bank should be at a level to provide three months import cover.
The central bank said that its foreign exchange reserves fell by $584 million to $6.12 billion by week ended December 16, 2022 when compared with $6.70 billion a week ago i.e. December 09, 2022.
State Bank attributed the decline in official reserves to external debt repayment. The current level of reserves witnessed multi years low as the SBP reserves were seen at $7 billion in April 2014.
The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP dropped by $14.026 billion.
READ MORE: PKR ends stable to dollar despite greenback demand for foreign payments
A day earlier, Malik Mohammad Bostan, Chairman of Forex Association of Pakistan (FAP) disclosed that a bulk amount of dollars were transferred through Afghan Transit Trade.
Bostan said that Afghan transit trade incurred huge financial losses to Pakistan. “A huge outflow of dollars from Pakistan is being done through Afghan transit trade. In this misuse not only Afghan traders but Pakistani importers are also involved,” he said.
READ MORE: Rupee softens against dollar to PKR 224.71 in interbank
He explained that the Pakistani government imposed restrictions on imports of luxurious and non-essential items and levied huge import duties to discourage the imports. “Our importers have connections in Dubai, London, Europe, USA, Saudi Arabia etc. where they make payments through Hawala and Hundi (illegal payments) and import goods under Afghan Transit Trade,” he said, adding that these goods meant for Afghanistan but after unloading at Afghanistan those goods return to Pakistan.
