Rupee sees modest recovery

The Pakistani currency partially regained Rs0.13 against the US dollar in the inter-bank market, breaking the days-long slow-paced losing streak after the country’s foreign exchange reserves surprisingly remained stable despite a major foreign debt.

According to the State Bank of Pakistan’s (SBP) data, the domestic currency improved by 0.05%, closing at Rs278.31 against the greenback on Friday. It closed at Rs278.44/$ on Thursday.

Earlier, the currency had cumulatively lost 0.51% or Rs1.41 in the prior three weeks till Thursday compared to the five-and-a-half-month high closing at Rs277.03/$ in the last week of March 2024. In its latest weekly update on Thursday, the central bank reported that the foreign exchange reserves (held by SBP) improved by $14.4 million despite a repayment of $1 billion against a maturing Eurobond in the week ended April 12, 2024, closing stable at $8.05 billion in the week.

Earlier, financial market experts had developed a consensus that the reserves would drop to around $7 billion temporarily, foreseeing the reserves to be reinstated back to over $8 billion after the receipt of the International Monetary Fund (IMF) loan tranche of $1.1 billion later this month (April 2024).

The stability in the reserves is thought to be achieved through a mix of spikes in inflows of workers’ remittances sent home by overseas Pakistanis during Ramazan and likely inflows from multilateral and bilateral creditors. The rupee also received support after Finance Minister Muhammad Aurangzeb said rupee devaluation was not a condition from the IMF to win its new loan package currently being discussed with the Washington-based leading global fund.

The Exchange Companies Association of Pakistan (ECAP) reported that the local currency maintained a downturn in the open market, ticking down Rs0.02 on a day-to-day basis to close at Rs279.68/$ on Friday.

The disparity in the value of the rupee slightly widened to Rs1.37 (around 0.49%) between the inter-bank and open markets as rupee-dollar parity moved in two opposite directions during the day. However, the disparity remained well below the IMF recommended maximum limit of 1.25% (around Rs3.50 at current levels.

Published in The Express Tribune, April 20^th, 2024.

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