Pressure on foreign exchange reserves temporary

Murtaza Syed says external financing, reduced imports to bolster forex reserves

Our Correspondent August 21, 2022
Shares of 335 companies were traded. At the end of the day, 138 stocks closed higher, 179 declined and 18 remained unchanged. PHOTO: FILE


Pakistan’s central bank intervenes in the inter-bank market when it suspects market forces are unnecessarily undervaluing or overvaluing the rupee beyond its fair value against the dollar.

“When the FX (foreign exchange) market becomes disorderly, the State Bank does intervene to calm the markets and will continue to do so, as needed, in the future,” State Bank of Pakistan (SBP) Deputy Governor Murtaza Syed was quoted as saying in a meeting hosted by Pakistan Stock Exchange (PSX) with corporate leaders.

“At the same time, strong steps to counter any speculation have also been taken, including close monitoring and inspection of banks and exchange companies,” he said, according to a statement issued by PSX on Friday.

Murtaza Syed said extreme pressure on Pakistan’s forex reserves, currency and current account is “temporary in nature,” and is being forcefully addressed through proactive and concerted policy measures.

“Pakistan’s external financing needs over the next 12 months will be fully met. In fact, thanks to the $4 billion of additional financing commitments from friendly countries that has recently been secured, Pakistan will be over-financed. This will provide an additional boost to the FX reserves in FY23,” he added.

Murtaza Syed further stated that imports are expected to decline in the coming months owing to some ease in global commodity prices as well as domestic demand moderation due to policy initiatives.

“Payments under FX contracts and LCs (Letters of Credit) will soon be back to normal,” he said.

The rupee had come under significant pressure during June and July 2022, primarily due to a stronger dollar worldwide, deterioration in the country’s current account deficit and domestic political uncertainty, Murtaza Syed explained.

SBP’s monetary policy stance and measures to reduce the import bill were prudent and necessary for dissipating inflationary pressures and consequently for sustainable growth in the medium term, he maintained.

Published in The Express Tribune, August 21st, 2022.

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