KARACHI: The Pakistani Rupee (PKR) recovered Rs1.31 against the US dollar on Wednesday after falling to the historic low a day earlier.
The exchange rate ended with a recovery of Rs1.31 in rupee value to Rs201.52 to the dollar from previous day’s closing of Rs202.83, the all-time low, in the interbank foreign exchange market.
READ MORE: Dollar hits record high at Rs202.83 in interbank
Currency experts said that the market was remained volatile during the day. The experts said that the market participants were shaky as the exchange rate opened at Rs201.50 to the dollar and fell to Rs200.50 and suddenly the dollar against appreciated to Rs201.20. “All these movements were recorded within 30 minutes in morning trade,” an expert said.
This is causing discomfort in the market. Shaking confidence of Importer and exporter and foreign investor, according to the expert.
READ MORE: Dollar hits Rs200.06 as rupee falls sharply in interbank
The currency experts said that the rupee was under immense pressure due to import payment demand and falling foreign exchange reserves.
They said that usually import payment high in the last month of a fiscal year, especially for the oil imports.
It is pertinent to mention that the government had twice increased the prices of petroleum products since May 26, 2022 in order to satisfy the International Monetary Fund (IMF) for the release of next tranche of about $1 billion.
Although the since announcement of raising petroleum prices the rupee witnessed a recovery. However, the falling foreign exchange reserves of the central bank once again put pressure on the local unit.
READ MORE: Dollar rebounds to Rs197.92; halts rupee’s gaining streak
The foreign exchange reserves of the State Bank of Pakistan (SBP) fell two years low to $9.72 billion by week ended May 27, 2022. The SBP foreign exchange reserves were at $10.089 billion a week ago i.e. May 20, 2022. The central bank said that its reserves were decreased by $366 million to $ 9.723 billion due to external debt repayment. The SBP’s foreign exchange reserves were at $9.96 billion on June 19, 2020.
The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since touching the peak the central bank’s foreign exchange witnessed a continuous decline. The official reserves of the SBP fell around $10.423 billion by week ended May 27, 2022 from touching the peak on August 27, 2021. The official reserves of the SBP also reduced to payment for 1.46 months for import cover.
READ MORE: Dollar weakens for 5th straight day; ends at Rs197.59
Overall the foreign exchange reserves of the country declined by $379 million to $15.771 billion by week ended May 27, 2022 as compared with $16.150 billion a week ago. The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.547 billion.
The dollar hit record high at Rs202.01 on May 26, 2022. However, with the decision of the government to partially withdraw the subsidy to get next tranche of the IMF, the rupee sharply made gains against the dollar. The local unit made a recovery of Rs4.42 against the dollar during past five sessions.
The rupee remained under pressure against the greenback during the current fiscal year. The State Bank of Pakistan (SBP) has taken various measures to support balance of payment and the local currency. However, the measures ended in a failure to help the rupee to recover losses.
READ MORE: SBP’s forex reserves fall two-year low to $9.72 billion
The SBP on May 23, 2022 announced a sharp increase in policy rate by 150 basis points to 13.75 per cent from 12.25 per cent.
Recently the government announced to impose a complete ban on imports to support balance of payment and help rupee to stable. However, these measures appeared in failure as the exchange rate yet again deteriorated today massively.
Pakistan’s import bill massively increased to $72.18 billion during first 11 months (July – May) 2021/2022 as compared with $50.03 billion in the same period of the last fiscal year, showing an increase of 44.28 per cent.
READ MORE: Dollar loses Rs4.14 in four sessions; falls to Rs197.87
Pakistan is a net importer of petroleum products to meet its domestic demand. The country’s energy bill was $17.03 billion during the first nine 10 months (July – April) 2021/2022 as compared with $8.69 billion in the corresponding period of the last fiscal year, showing a massive growth of 96 per cent. The oil bill is around 25 per cent of the total import bill of the country.
