by ARSHAD HUSSAIN
The US Greenback once again rose against the local currency (PKR) in the open currency market on Friday and touched Rs 108.00 mark owing to its shortage and low inflows of remittances, said market experts.
The dollar is being traded at Rs 107.70 for buying and Rs 108.00 for selling in the kerb market while it was stable at Rs 104.80 for buying and Rs 104.90 for selling in the interbank market. The exchange rates difference is almost Rs 2 in the open currency market and the interbank.
The pressure on greenback started in the open currency markets for last one month when the exchange companies received huge demand of dollars from gold importers, the inside source informed. However, they did not know while they are registered or unregistered importers, they said adding that importers are buying the dollars in all cities of Pakistan which creates artificial shortage of dollar in the country.
“According to a rough estimate, the demand from gold’s importers exceeds $5 million per day in the kerb,” a currency dealer said. The gold is being smuggled from Arab countries through routine flights in all over the countries, he added. The gold importers are earning Rs 2000 to Rs 2500 per 10 grams import from Dubai and other Arab countries owing to the cheaper gold rates.
In this connection, a meeting of Forex Association of Pakistan was held with governor State Bank of Pakistan (SBP) last week. The association had informed the SBP about the import of gold and other measures taken by them in this regard, said a representative of the association. He further said that he had sent a letter to the ministry of finance regarding this issue and requested to take action against the importers of gold.
On the other side, country’s rising trade deficit, reduction in remittances and foreign direct investment are also building pressure on the interbank markets, which increased by over 30 paisa during last five days.
According to the SBP, the dollar reserves declined by $230 million in last six days and country’s reserved stood at $23.865 billion from the highest reserved of $24.6 billion in the start of this month. The SBP also injected millions of dollar in the interbank market to control the greenback.
“The remittances coming from abroad in the Real Estate industry had also been stopped since the start of this fiscal year after restructuring in Deputy Commissioner (DC) valuation rates and Capital Gain Tax imposed by the ministry of finance,” the industry source said.
In last four months, the remittances had been shrunk by 3.9 percent only because of the property valuation taxes while the Federal Board of Revenue (FBR) and Federal Investigation Agencies (FIA) had also been investigating remittances coming through exchange companies, he added.
He claimed, “Pakistani people settled abroad send or invest millions of dollar in the property markets to get higher profits but after impositions of this new property valuations and three-year capital gain tax, they faced hurdles in the real estate businesses in Pakistan.”
Exports of the country have been declined during the mentioned period affecting US dollar,” the bank official said. In last four months, the country’s imports had crossed $15 billion mark while exports stood at $6.432 billion only.
Pakistan’s economy will remain hale and hearty in the next four years notwithstanding it has been weaned off the loan reform program of the International Monetary Fund (IMF), a brokerage said.
“Post-IMF, Pakistan’s economy will remain on track,” Topline Securities said in a report titled, ‘Pakistan Economy: Post-IMF Risks Overplayed’. The report based its forecast up to 2020 on stabile external account, GDP growth, sustainable fiscal situation, low inflation and interest rate and firm exchange rate.
In September, Pakistan concluded a three-year $6.7 billion extended fund facility program of the IMF. The report said external account will stay stable despite falling exports and mounting foreign debts. “Foreign direct investment is expected to be the saviour and likely to increase to six billion dollars by 2019/20,” it added. “There are also expectations of significant China-Pakistan Economic Corridor (CPEC) flows, which will double Pakistan’s external liabilities to $24 billion by 2019-20, while external public debt expected a slight increase from $59 billion to $62 billion in 2015-16.”
China pledged $46 billion in investment to improve infrastructure networks across the country and help the country increase power generation under a row of CPEC projects. Contrary to the government GDP target of 5.7 percent for the current fiscal year, the brokerage forecast it at five percent because of subdued performances of agriculture and manufacturing sectors.
Inside securities, a local brokerage house said, “after the 15 months of stability, PKR has finally started to feel pressure after US Dollar has triggered EM and regional currencies depreciation.”
As a result, Pak rupee was depreciated by 1 percent in open market in November 2016 (though stable in interbank), which is in line with the expectations but still lower than the depreciation in Indian Rupee (-2.6%), Bangladeshi Taka (-1.2%), Indonesia Rupiah (-3.2%), Thai Baht (-1.3%) and Malaysian Ringgit (-4.9%).
In this scenario, the analyst said we cannot rule out (3-5 per cent) currency depreciation as SBP Dollar injections may not be helpful in cooling down US Dollar rate which is hovering above Rs 107 in Open Market compared to interbank rate of Rs 104.8/USD.