The value of the rupee is touching the lowest ebb against the dollar in the history of Pakistan, apparently, because of the country’s fast depleting foreign exchange reserves.
According to official data, the country held dollar reserves of $ 13.37 billion up to the week that ended on Dec 7. Of this total, over $ 4.8 billion belong to the private banks with the State Bank left with only $ 8.5 billion in hand.
This downward trend in Pakistan’s forex reserves is said to be a major reason for a persistent devaluation of rupee against the greenback that appreciated by over Rs 3 against the Pakistani currency during last three months. Friday saw the rupee trading at the lowest level of Rs 98.40 versus dollar. The dealers in the local money market, however, think otherwise and point finger at the profit-crazy bankers while assigning major reasons to the ongoing negative balance in the rupee-dollar parity.
Talking to Pakistan Today, the money exchangers claimed that the banks had panicked the importers by creating rumors in the market. The rumors, the exchangers alleged, include the spread of misleading forecasts that the dollar was set to appreciate further against the rupee owing to Pakistan’s fast depleting forex reserves that are being drained out to the International Monetary Fund (IMF) in the face of heavy debt repayments.
“Resultantly, the panicked importers are rushing to the banks for forward booking of the dollar for six months,” said Malik Bostan of Forex Association of Pakistan (FAP).
The importers, Bostan said, were placing advance orders with the banks for the greenback at a rate as high as Rs 101. “The banking cartels take benefit out of forward booking,” he claimed.
Such speculations whereas have allegedly pushed the importers towards forward booking of the US currency, in which they have to clear their import bills, the same is said to have led to hoarding of the greenback.
As claimed by a local currency dealer, Shahid Usman, who accused the banks of sitting over a heavy chunk of dollars, thus creating a shortage in the inter-bank and open market. “The banks say we have no dollars available as the State Bank is not providing us with the same,” the dealer said. Usman seconded the impression that the banks were forcing the importers towards forward booking by spreading rumors.
However, when contacted a senior banker rejected the allegations as “baseless” and said the dollar’s appreciation was because of the hype created by the market sentiments coupled with reports of Islamabad’s intention to seek a fresh bailout package from the IMF. “Rupee is weakening because the dollar is strengthening,” he said.
“The same had also happened in 2008 when Pakistan had sought the IMF’s SBA package. The dollar had then shot up to Rs 84 from Rs 61,” the banker argued.
The banker opines that the present PPP-led government would not go for a fresh IMF loan on the back of positives like Balance of Payment showing a surplus in the first five months and improved inflow of worker remittances.
The FAP chairman Bostan, however, insisted that such negatives would keep pressure mounting on the already volatile rupee. “The government must interfere and the State Bank should come up with a clear statement on the status of its reserves,” the money dealer proposed.
Also, he demanded of the economic mangers to take urgent steps towards the realization of foreign financing pledged or budgeted under various heads. This, he said, included $ 600 million under Coalition Support Fund, $ 800 million proceeds against the PTCL privatization and foreign inflows to come through the issuance of third generation licenses to the telecom sector.
Bostan also urged the government to press the IMF for rescheduling of the debt repayments which, he claimed, were being repaid at a much higher rate of 4.5 percent against the Fund’s international market rate of 1 percent. Despite the apparent trust deficit on the two sides, the money exchangers and bankers agree that if the remedial measures were not taken the rupee would keep losing face to the dollar and would slid down to Rs100. “If the inter-bank rates also rose on Monday the dollar would soon cross the Rs 100 mark,” said a currency dealer. A banker in one of the leading banks, however, foresees this possibility by February or March next year.
