Pakistani Rupee balance itself against US dollar in open market
Beijing, 13th Dec, (Gwadar Pro) – Forex Association of Pakistan President Malik Bostan stated that dollar was traded as low as Rs154.70 in open market earlier this week which was much lower compared to Rs164 on June 26 this year.
He said, “We traded dollar at Rs154.70 as lowest and Rs155 as the highest rate during the day. These were lowest prices since it touched Rs164,”
While explaining it further Bostan said “One of the biggest reasons is that the country has come out from huge current account deficit of $20 billion in FY18 and now[in] October, [it] posted a surplus for the first time after four years.”
Pakistani Rupee has strengthened to hit a five-month high against the greenback fall owing to decline in imports, higher flow of foreign funds and positive macroeconomic news from the South Asian country.
Currency dealers at banks said that the frequent inflows from International Monetary Fund, the Asian Development Bank and lower outflows for imports have reduced dollar demand.
The local currency is starting to see relatively better days after the Pakistan government depreciated the currency substantially, claiming that the previous value was being artificially maintained and was hence, affecting the market.
The government handled current accounts deficit by bringing down the imports, and is also determined on increasing the foreign reserve due to the financial aid that the country is receiving. This has helped the rupee balance itself against the dollar in open market.
This is good news for the local investors, who were uncertain about the market conditions and were prone to invest more in buying foreign currency instead of increasing reserves of the national rupee.
It is also expected that the import bill will reduce further in the next fiscal year. With that agenda in mind, it is likely that the current trajectory will push through and help the Pakistani rupee stabilize in the open market. The devaluation upset a lot of stakeholders in the country, however, the market forces have now started setting the real exchange rate.
Importantly, Moody’s investor service upgraded Pakistan’s credit rating outlook from negative to stable. The accompanying report to the upgrade said that it reflected the county’s large economy and robust growth potential. The report also cited the International Monetary Fund program that helped stabilize the economy. Moody’s also confirmed the B3 rating on senior unsecure debt.
This is good news for the nation that has been dealing with an economic slowdown during the previous months. The Confidence surrounding the Pakistan’s economy improved little further when In November last month, the World Bank ranked Pakistan at number six amongst the top 20 global reformers. As per the report, Pakistan has improved 28 ranks, from 136 to 108. It has also acknowledged top 10 economies including Pakistan that improved the most on the ease of doing business after implementing regulatory reforms.
In particular, the government is planning to introduce a new State Bank of Pakistan (SBP) Act to forbid central bank financing of government debt and clarify SBP’s primary objective of price stability.
The IMF program, which commenced in July 2019, targets higher foreign exchange reserve levels and has unlocked significant external funding from multilateral partners including the Asian Development Bank and the World Bank.
However, unless the government can effectively mobilize private sector resources, foreign exchange reserves are unlikely to increase substantially from current levels.
(By Fatima Javed)
