Rupee sheds value on political uncertainty

Pakistani currency depreciated Rs0.13 and closed at Rs278.63 against the US dollar in the inter-bank market on Monday apparently in the wake of political uncertainty in the country as well as in the region.

According to the State Bank of Pakistan (SBP) data, the rupee had closed at Rs278.50 against the greenback on Friday last week.

The currency has, however, continued to move in a narrow band of Rs278-278.66/$ for the past four and a half months, indicating a largely stable position around current levels.

The talk of fresh parliamentary elections in the country and a sudden change in political dispensation in Bangladesh mounted pressure on the rupee ahead of the much-awaited International Monetary Fund (IMF) executive board meeting for approval of a new $7 billion loan programme for Pakistan in the current month.

Market talk suggests the rupee will remain stable at current levels over the next three to five months. The government too has worked out the rupee-dollar parity at Rs295/$ for the current fiscal year.

The award of the new loan programme is projected to unlock multilateral and bilateral financing from other global financial institutions and friendly countries. These inflows may help keep the rupee stable in the short to medium run.

In addition to that, an increase of $75 million in the central bank's foreign exchange reserves to $9.10 billion in the week ended July 26 signalled that supply of the foreign currency stood higher than its demand, which propped up the rupee against the greenback.

As a significant source of foreign currency, the overseas Pakistanis deposited and invested $1.90 billion through the Roshan Digital Account (RDA) in the previous fiscal year ended June 30, 2024.

With that injection, the cumulative gross inflows reached $8.25 billion since the launch of the scheme in September 2000 amid economic stability in recent months and higher returns on investment in the Naya Pakistan Certificates.

According to the central bank, the net RDA inflows, excluding those taken out of the country and those utilised inside the country, rose $311 million to $1.43 billion in FY24, partially helping to stabilise the foreign exchange reserves at $9.10 billion compared to around $4 billion in June 2023.