The Pakistani currency reached a one-month high, just below Rs285 against the US dollar in the interbank market, sustaining its winning streak for the fifth consecutive working day on Monday. This surge comes amid an improved supply of foreign currency in the system.
According to State Bank of Pakistan’s (SBP) data, the domestic currency appreciated by 0.15%, or Rs0.44, closing at Rs284.53 against the greenback. Over the past five working days, the currency has cumulatively risen by 0.39%, or Rs1.11.
The Exchange Companies Association of Pakistan (ECAP) reported a 0.17% increase, or Rs0.50, resulting in the closure at Rs285.50/$ in the open market.
This positive trend is attributed to the central bank’s reports indicating an increase in foreign exchange reserves (held by SBP), rising by $77 million to $7.225 billion in the previous year.
Market reports suggest that the central bank is actively purchasing surplus supplies of the US dollar from the interbank market. This move not only allows the SBP to acquire surplus supplies at an increasing price but also stabilises foreign exchange reserves, which currently provide cover for two months of imports.
Read: Rupee surges to one-month high, closes below Rs285/$
Optimism surrounds the imminent approval by the International Monetary Fund (IMF) executive board for the release of the next tranche of $700 million in December 2023 or January 2024. This approval is expected to unlock an additional $1.5-2 billion from other multilateral and bilateral creditors.
In mid-November, the IMF staff approved the tranche following the successful completion of the first domestic economic review under the ongoing $3 billion loan programme.
Additionally, the anticipated influx of multibillion-dollar investments from countries such as Saudi Arabia and Kuwait in mining, agriculture, IT, and telecom sectors, including projects like Reko Diq and a petroleum refinery, is expected to further increase the supply of foreign currency. These developments contribute to the rupee’s remarkable gains, with some currency dealers and politicians believing the rupee has the potential to reach Rs250/$ or even dip below Rs200/$ in the long run.
Published in The Express Tribune, December 5th, 2023.
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