KARACHI: As Pakistan’s import pressure decreased in July, the US dollar lost ground against the rupee for the fourth day in a row during intraday activity in the interbank market.
The dollar decreased by Rs12.38 on Wednesday’s intraday session, trading at Rs226 to the rupee, down from 238.38 at Tuesday’s interbank close.
The rupee, one of the poorest performing currencies in the world, began losing momentum on Friday after falling for 10 straight sessions in the latter days of July and appreciating by about 5% just last week.
According to data from the Pakistan Bureau of Statistics (PBS), imports have decreased by 38.3 percent over the past month as a result of the government’s decision to ban a variety of luxury goods in order to address the country’s cash deficit.
The decline in imports was accompanied by a decline in exports as well. The trade deficit decreased by 18.3% to $2.64 billion in July 2022 from $3.235 billion in July 2021, easing pressure on the currency. The shortfall was $4.96 billion in June 2022.
Tahir Abbas, the head of research at Arif Habib Limited, told Geo.tv that the currency is stabilising and likely to strengthen further as import pressure has decreased and demand has decreased.
External account numbers, according to capital market analyst Muhammad Saad Ali, are optimistic and will help the economy grow even more.
The International Monetary Fund (IMF) announced that Pakistan has fulfilled the final prerequisite, namely raising the petroleum product tax, for the combined seventh and eighth reviews, which led to further strengthening of the currency.
A board meeting is provisionally scheduled for late August after sufficient finance assurances are secured, according to a statement released on Tuesday by Esther Perez Ruiz, the IMF’s Resident Representative for Pakistan.
Abbas stated that additional influxes from friendly nations, together with the IMF tranche release anticipated by the end of this month, will also contribute to the stabilisation of the economy in light of the lender’s remark.
As Pakistan prepares to make a $1 billion bond payment in December, the rupee has lost more than 30% of its value versus the dollar this year and the nation’s dollar debt has fallen to record lows.
According to Ali, “news flow that Pakistan is nearing the resumption of IMF programme — such as IMF acknowledgment that Pakistan has satisfied all preceding conditions — […] have fuelled optimism for stronger macroeconomic stability in the future.”
The government is working to secure billions of dollars from the IMF as well as from nations like China and Saudi Arabia in an effort to stave off fears that the country will follow Sri Lanka into default this year.
In response to a question about the current political climate, Ali stated that it appears that neither the PTI nor the government are advocating for early elections, which could “delay the steps” required to ensure macroeconomic stability.
