Pakistani rupee maintained its uptrend for the seventh successive working day and hit a 23-month high of Rs152.6 against the US dollar in the inter-bank market on Thursday following an increase in supply of foreign currencies compared to demand in the domestic market.
With fresh appreciation of Rs0.44, the rupee has cumulatively gained Rs1.9 (or 1.23%) in the past seven working days and closed at Rs152.6 against the US dollar. Such a closing level was last seen in June 2019, according to the State Bank of Pakistan’s (SBP) data.
“The rupee has rebounded amid a significant surge in workers’ remittances sent home by overseas Pakistanis from across the world ahead of Eidul Fitr (which is falling in the middle of May),” Pak-Kuwait Investment Company (PKIC) Head of Research Samiullah Tariq said while talking to The Express Tribune.
SBP Governor Dr Reza Baqir said some time ago that remittances increased 43% to an eight-month high of $2.77 billion in March 2021 compared to the same month of previous year and expressed hope that inflows would swell further in April ahead of Eidul Fitr.
“Historical evidence suggests that remittances usually surge ahead of Eid,” he said.
Besides, the overseas Pakistanis have deposited foreign currencies with local banks and invested over $1 billion in different schemes through the Roshan Digital Account (RDA) in the past eight months.
The additional inflows, which are mostly parked in Naya Pakistan savings certificates, have helped strengthen the rupee against the greenback and other major world currencies.
“Rupee has appreciated due to restricted outflow of the currency amid Covid-19 as it was sold usually for international travel and foreign tourism,” said Alpha Beta Core CEO Khurram Schehzad.
“On the other hand, the high inflows on account of RDA, remittances and exports aided the uptrend.”
The inflow will continue to increase supplies in the domestic market for some more time whereas the outflow will remain limited given the third wave of Covid-19. “Since India is impacted the most (by the pandemic), Pakistan will continue to benefit from more technology exports,” he said. Exchange Companies Association of Pakistan (ECAP) President Malik Bostan said that history suggested that the flow of remittances into the country increased 40-50% in the last 10 days of Ramazan compared to the rest of the days in the holy month.
“Five-year data suggests that strong inflows help the rupee gain 1-2% during the month of Ramazan,” he said.
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Hawala/ Hundi may reorganise
Bostan, however, voiced fear that rupee inflows may get diverted to the illegal channels of Hawala/ Hundi in the last 10 days of Ramazan owing to the government’s decision of closure of the financial sector including exchange companies for about a week on account of Eid holidays.
“We have written letters to Finance Minister Shaukat Tarin and Planning Minister Asad Umar to allow us to open exchange companies and let remittances enter Pakistan through legal channels like exchange companies (and banks),” he said.
Bostan added that there were a large number of overseas Pakistani workers who got wages on a weekly basis. “How can such workers send money to their family members for Eid expenditures if the financial sector is closed completely?” he asked. “They will obviously turn to Hawala/ Hundi operators.”
Published in The Express Tribune, May 7th, 2021.