Reserves rise to $9.11b on dollar buying

Rupee remains under pressure, closes at Rs278.39/$

KARACHI:

Pakistan’s foreign exchange reserves, held by the State Bank of Pakistan (SBP), increased $16 million and stood at $9.11 billion in the week ended May 31, 2024, as the central bank apparently continued to follow its policy of absorbing surplus supply of the greenback from the domestic market.

Despite the improvement, the country’s capacity to pay for goods and services’ imports remained low with the reserves covering less than two months of imports. However, Pakistani currency remained under pressure for most of the day, as it lost Rs0.09 to close at Rs278.39 against the US dollar on Thursday.

According to the central bank’s data, the foreign exchange reserves held by commercial banks decreased $116 million to $5.10 billion in the week under review. Accordingly, the total foreign currency reserves dipped $100 million and settled at $14.21 billion.

Pakistani currency came under renewed pressure after the government directed the central bank to arrange over $750 million for paying the outstanding dues of foreign power producers operating in Pakistan.

In addition, Pakistan has a high foreign debt obligation amounting to $10 billion for June and July 2024. Government authorities are expected to get the loans rolled over since most of the maturing debt has been acquired from friendly countries.

Still, the government will have to bear interest cost on the country’s total debt and repay some small commercial loans in two months, which cannot be rolled over.

Market talk suggests the rupee remained under pressure for most of the time on Thursday and hit the intra-day low at Rs278.47/$ with a loss of Rs0.17. The intra-day loss shrank to Rs0.09 by the end of the day, when the rupee settled at Rs278.39/$.

The Exchange Companies Association of Pakistan reported that the local currency decreased Rs0.08 on a day-on-day basis, closing at Rs279.67/$ in the open market.

The currency is expected to move in a narrow band and stay stable near and around current levels till the end of June 2024. Later on from July onwards, it may resume a gradual downward trend.

Pakistan’s government has assumed the rupee-dollar parity at Rs295/$ for the next fiscal year with a depreciation of 5.7%.

Published in The Express Tribune, June 7^th, 2024.

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