KARACHI:
Pakistani currency came under moderate pressure against the US dollar at the reopening of inter-bank market post-Eid holidays on Monday, hitting a three-week low above Rs278 after Finance Minister Muhammad Aurangzeb reached Washington for formal talks with the International Monetary Fund (IMF) for securing a longer and bigger loan programme.
This coincided with a nominal drop of $0.1 million in the State Bank of Pakistan’s (SBP) foreign exchange reserves, which reached $8.04 billion in the week ended April 5, 2024.
Total reserves of the country, however, hit a nine-month high at $13.44 billion. Next weekly update may show a temporary drop of $1 billion following repayment of a maturing foreign debt.
According to SBP’s data, the rupee depreciated 0.06%, or Rs0.18, and closed at Rs278.12/$ compared to Rs277.94/$ on Tuesday last week, which was the last working day before Eid and weekly holidays.
The currency has cumulatively lost 0.39%, or Rs1.09, in the past three weeks compared to the five-and-a-half-month high close at Rs277.03/$ in late March.
Earlier, the rupee gained 10.5%, or over Rs29, over a period of seven months and reached the five-and-a-half-month high compared to the record low close of Rs307.10/$ in the first week of September 2023.
Exchange Companies Association of Pakistan (ECAP) reported that the local currency dropped 0.10%, or Rs0.29, on Monday, closing at Rs279.66/$ in the open market.
The sudden escalation in geopolitical tensions impacted the rupee-dollar parity.
The currency also came under pressure amid the beginning of talks with the IMF for a new loan programme. The global lender always demands that the government end its influence over the rupee-dollar parity and let market forces (mostly commercial banks) determine the exchange rate while considering the greenback’s supply and demand.
Earlier too, the currency had come under similar pressure when the IMF was conducting its last review in March under the $3 billion standby arrangement. Later, the currency resumed its uptrend after Pakistan clinched a staff-level agreement with the IMF for the release of last tranche of $1.1 billion.
Though supply of the greenback remained higher compared to its demand for imports, the SBP’s foreign exchange reserves ticked down $0.1 million to $8.04 billion in the week ended April 5.
The reserves held by commercial banks, however, rose $62.9 million to $5.40 billion, taking total reserves to a nine-month high of $13.44 billion.
In the next weekly update, the central bank reserves will show a decrease of $1 billion as Pakistan successfully repaid $1 billion for a maturing 10-year Eurobond on Monday (April 15).
The reserves will surge again to more than $8 billion as the IMF is due to release a $1.1 billion tranche later this month or early next month.
Published in The Express Tribune, April 16th, 2024.
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