Rupee partly recovers as import pressure eases

KARACHI:

Pakistani currency appreciated Rs0.08 and closed at Rs278.62 against the US dollar in the inter-bank market on Tuesday amid easing of import payment pressure and increase in supply of foreign currency in the banking system.

According to the State Bank of Pakistan (SBP) data, the rupee on Monday had been pulled down to Rs278.70 against the greenback in the wake of oil import payments.

In the open market too, the local currency edged up Rs0.08 on a day-on-day basis, reaching Rs280.95/$, according to the Exchange Companies Association of Pakistan.

The end of temporary import payment pressure, coupled with robust inflows of workers' remittances, standing at nearly $3 billion for August 2024, partly helped increase supply of foreign currencies to domestic markets and propped up the local currency.

To recall, the remittances spiked 44% in the first two months (Jul-Aug) of the current fiscal year, reaching close to $6 billion compared to the same period of last year. The inflows suggest that the supply of foreign currencies has remained higher than their muted demand, particularly for US dollars for import payments.

Moreover, the downward trend in international crude oil prices also kept dollar demand low, providing support to the rupee to stand firm around current levels.

Global oil prices have come down by over $20 per barrel over the past five months, slipping below $70. The share of energy in Pakistan's total imports is calculated at around 20-25%, therefore the drop in oil prices is a positive development for the rupee in particular and the economy in general.

The currency has remained largely stable in the range of Rs278-279/$ over the past five months.

Financial experts anticipated that the currency would stay stable till the end of December 2024, but it may slightly fall in later months.

However, there was uncertainty in currency markets following prolonged delay in the International Monetary Fund (IMF) executive board's approval of a $7 billion loan programme for Pakistan.