KARACHI: Analysts expect the rupee to remain stable against the US dollar next week as the country is engulfed in political turmoil following the conviction of Pakistan Tehreek-e-Insaf (PTI) chairman Imran Khan in the Tosha Khana case.
However, there is uncertainty among experts as to whether the rupee will weaken against the dollar when the interim administration takes over before elections this year.
Throughout this week’s trading, the rupee exhibited range-bound behavior. The currency came under pressure and fell to 289.38 against the dollar on Wednesday due to increased demand from importers following the easing of import restrictions.
However, the rupee managed to recover and closed at 286.97 on Friday after closing at 286.64 yesterday.
According to Prime Minister Shehbaz Sharif, Pakistan’s National Assembly will be dissolved on August 9, three days before the end of the current five-year parliamentary term. General elections later this year will be made possible by the dissolution of the Assembly.
“From an economic perspective, Pakistan has secured a standby agreement from the IMF, and the relevant FX inflows will continue regardless of the political situation,” said Fahad Rauf, head of Ismail Iqbal Securities. Should continue to trade near
Khan, the most popular opposition leader, has been jailed twice so far this year.
Khan’s arrest in May and prolonged detention on suspicion of a separate case sparked major political unrest and sent the local currency to a record low against the US dollar. Supporters and police engaged in deadly clashes, and several military positions were attacked.
Regarding Khan’s arrest, Mustafa Mustansar, head of research at Taurus Securities, said, “I think the markets will respond positively to this because it defines the political path forward.”
He also said that the rupee will remain stable. “Similarly, expect the rupee to remain stable even during the caretaker setup. Conversely, markets will react negatively to any delay in general elections,” Mustansar added.
Tracemark quoted analysts as saying that the rupee is expected to weaken against the dollar during the interim government setup, but the fall is likely to increase inflation.
“With the caretaker government taking over next week, analysts expect the rupee to weaken, but any weakness would fuel further inflation, which everyone wants to avoid,” it said.
“Not only did Pakistan beat Sri Lanka in style in the cricket Test series, we also beat them on inflation (29%-12%) and interest rates (22%-11%), adding that more What is the undocumented siphoning of capital (via hawala/handi) may be the largest in recent history and unprecedented in the region, and consistently eats up a 65 to 7% premium to the dollar in the black market.
According to Tracemark, if there is no progress on meaningful reforms while managing ‘practical’ solutions such as burdening the common people and the formal sector and increasing taxes on the salaried class, the bleeding will continue. There will be a drastic reduction in the size of the economy.
In the last couple of weeks, we have seen a lot of payments clearing on the import side. Along with this, some defense-related payments were cleared, he said.
The current account also appears to be moving towards surplus. It noted that the rupee has continued to depreciate on a real effective exchange rate basis. “Forex reserves have stabilized and around $3 billion of total capital disbursements of $4 billion have been managed for the current quarter,” it said.
“Given these factors, it would make sense to maintain the USD-PKR parity, but it will all depend on how much heat the caretaker government can take from the IMF,” it added.
