The downtrend in the local currency persisted on Friday and the rupee fell to a fresh all-time low at Rs178.04 against the US dollar in the inter-bank market owing to expectations of unsustainable current account deficit for the month of November.
According to the State Bank of Pakistan (SBP), the rupee had closed at Rs177.98 on Thursday. Speaking to The Express Tribune, Arif Habib Limited Head of Research Tahir Abbas said that the fall was witnessed on the back of import pressure. The value of inward shipments of goods in Pakistan soared past market’s expectations to nearly $8 billion in November which enhanced demand of the US dollar.
“Moreover, Pakistan expects a lofty current account deficit of around $2.25-2.5 billion which is unsustainable hence the rupee is dipping,” he said.
AA Gold Commodities CEO Adnan Agar regretted that stability in the local currency could not be achieved despite the receipt of $3 billion from Saudi Arabia. According to him, this was because of lack of intervention from the State Bank of Pakistan in the foreign exchange market. “Speculators are confident of no intervention from the central bank hence the currency keeps on devaluing,” he said.
He projected some kind of short term intervention from the State Bank of Pakistan but lamented that the rupee would continue to depreciate until the International Monetary Fund (IMF) deposits the next tranche worth $1 billion in the central bank. Echoing his views, Arif Habib Commodities CEO and Managing Director Ahsan Mehanti said that rupee was expected to remain volatile until the receipt of next installment of $6 billion bailout package from the IMF.
“Unfortunately, speculation is mounting against the rupee due to widening current account deficit,” he said. “Trade deficit is also rising and uncertainty over government’s policies to deal with ballooning trade and current account deficits is fuelling the plunge in the rupee.”
Published in The Express Tribune, December 18th, 2021.
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