The Pakistani rupee devalued to almost Rs 100 against a dollar Monday because of tightening in the inter-bank market.
Under immense pressure for negatives in the country’s external account, the rupee traded between Rs 99.75 and Rs 99.95 on the open market while the inter-bank market saw the greenback changing hands at Rs 98.70 in the afternoon. “The increase in dollar is because of tightening on the inter-bank (market),” said Muhammad Shahid Usman, a local currency dealer. The economic observers tend to attribute this inter-bank tightening to a fresh decrease of $146 million in the country’s depleting foreign exchange reserves on account of 9th repayment the central bank Monday made to the International Monetary Fund (IMF).
The dollar reserves the country held last week, up to February 1, amounted to $ 13.474 billion. Of this total, the State Bank possesses $ 8.586 billion while the balance $ 4.887 billion belong to the banks other than SBP. “Yes, we have made the 9th repayment worth $ 145.791 million to the IMF on Monday,” Syed Wasimuddin, chief spokesman of SBP confirmed to Pakistan Today. More pressure on the rupee can aptly be expected in the days ahead as on February 26 the State Bank of Pakistan (SBP) is due to release over $ 258 million more as a 10th installment of the IMF’s 2008’s half-paid Standby-Arrangement (SBA).
“We would be repaying $ 258 million more as a 10th installment to the Fund on the 26th of this month,” the SBP spokesman added. While Wasimuddin preferred to remain tightlipped on the impact of these millions draining out under the head of IMF repayments, the economic observers deem the same as a major reason for rupee depreciation.
“It is a routine gradual depreciation of Pak rupee which is quite expected due to loan repayments and lower inflows,” Khurram Schehzad, a senior analyst at Arif Habib Group, told Pakistan Today.
To Khurram, Monday’s devaluation of the local currency stands a routine matter, as he said: “It was already close to 100 so touching 100 was quite expected”.
The analysts at Arif Habib Research think that second half of the current fiscal year, January-JuneFY13, was posing challenges for the overall economy due to factors like an uncertain election timeline, political transition, oil price fluctuation and high repayments to the IMF.
There is, however, much more than IMF repayments that can be seen deciding the fate of rupee on the local market.
Of Monday’s dip in the rupee value the official and unofficial quarters believe that “sentiments” of the consumer of the greenback, including importers and general public, were playing equally an important role to this effect. The consumer, according to currency dealers, feel highly vulnerable thus panicked ever since ‘revolutionaries’ like Dr Tahirul Qadri of Tehreek Minhajul Quran entered local politics.
“Factors like the prevailing poor law and order, government’s inability to announce the election schedule, lingering talks with the IMF for a fresh loan and the resultant dollar shortfall have panicked the importers and general public,” Malik Bostan, chairman Exchange Companies Association of Pakistan (ECAP), told Pakistan Today. He also cited “forward deal” as a reason for dollar’s appreciation alleging that the banks, despite government’s warnings, were doing 6-month advance booking of the greenback by the importers at Rs 101. “They (banks) still are making huge profits out of forward deal with importers who are becoming more concerned over the rupee-dollar parity,” he claimed adding “The forward deal must be banned as it leads to speculative trading of the dollar.” The ECAP chief went on to say politico-economic uncertainties, specially the “Qadri factor”, had played havoc with the sentiments on the local currency market. “Qadri’s long march and his routine revolutionary statements have made the importers and other buyers afraid of political instability,” Bostan said.
Amid these concerns, one, however, could keep the optimism alive on the back of positives like the ever-increasing worker remittances that the dollar-starved country received to the tune of $ 8 billion during the first seven months of current fiscal year, July-January FY13. The country’s booming stocks market is another positive side of the ailing economy that is peaking to historic highs and attracting huge investment, particularly from the retail investors.
KSE INDEX: Monday saw the KSE-100 share index closing at the highest 17,548.54 points with market capital ballooning beyond Rs 4.396 trillion and trading turnover swelling to 278.248 million shares. Led by the second and third tier stakes, the market is said to have been clinching the new highs on the back of a strong positive announcement session. The reduction of discount rate to a single digit, 9.5 percent, by the State Bank is considered to have made the high-yielding equity market more attractive for the investors who are now exempted from declaring the source of their invested money.
