Rupee hits 13-month high

The Pakistani currency hit over a one-year high at Rs156.99 against the US dollar in the inter-bank market on Monday, as flow of foreign currencies remained high compared to outflows.

The inflows have kept the country’s foreign currency reserves stable at a 13-month high of $13 billion and strengthened Islamabad’s capacity to make international payments mainly on import and foreign debt repayment counters.

With a fresh gain of Rs0.14 on Monday, the currency has recovered almost 7% or Rs11.44 during the last seven months to date since it touched an all-time low of Rs168.43 on August 26, 2020.

“Overall, the flow of foreign currencies has improved post-Covid-19 pandemic,” Pak-Kuwait Investment Company Head of Research Samiullah Tariq told The Express Tribune.

The inflows through the central bank’s initiative Roshan Digital Account (RDA) have continued to grow and extended the much-needed support to stabilise the reserves, he said. Overseas Pakistanis have opened more than 100,000 accounts in local banks under RDA during the first six months, State Bank of Pakistan (SBP) updated last Friday (March 12).

“Accounts have been opened from over 100 countries around the world. Deposits have reached $671 million, with half of these coming in the last eight weeks alone,” the central bank said on its official Twitter handle.

“Going forward, the growing inflows under RDA are expected to hit the $1.5-billion mark by December 2021…and keep growing,” Tariq added.

The analyst said the latest recovery in rupee was partially backed by the reports that the UAE would roll over soft loan worth $1 billion to Pakistan. Islamabad was scheduled to pay off the loan last Friday (March 12), but the transaction did not take place.

“I guess UAE will roll over the loan since Pakistan’s relations with UAE have improved a lot in the wake of the change of administration in the US in January,” he vocalised.

Earlier, UAE also deferred repayment of another $1 billion by Pakistan in January. UAE provided a total of $2 billion to Pakistan in 2018 to help country avert the default situation on international payments.

He stated that the inflows under RDA have partially substituted Eurobonds. Earlier, Pakistan had planned to raise around $2-2.5 billion through floating Eurobond in the world markets. Recently, economic managers have changed their mind to raise only $750 million to $1 billion through the bond.

Moreover, the receipt of workers’ remittances from overseas Pakistanis also remained strong above $2 billion for the ninth successive month in February. The overall remittances have surged significantly by 24% to $18.74 billion during the first eight months (July-February) of FY21 compared to $15.10 billion in the same period of the last year.

The rupee also maintained an uptrend on the reports that Pakistan’s apparel exports grew 12% to the USA in January compared to other top nine apparel exporters to the USA whose exports dropped in the month, a market talk suggested.

Published in The Express Tribune, March 16^th, 2021.

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