KARACHI: A dollar shortage is likely to keep the rupee under pressure in the open market next week, while the local unit is expected to trade within a range in the interbank market as rates are kept under control by administrative measures JEE News reported Sunday.
During the outgoing week, the local currency has been volatile in the interbank market, falling as low as 287.15 per dollar on Tuesday and rising to 285.15 by the end of the week.
Pakistan’s economic condition is deteriorating with each passing day and its foreign exchange reserves are depleting, risks of default are also increasing.
While the country is making desperate efforts to restart a stalled $6.5 billion bailout with the International Monetary Fund (IMF), chances are shrinking every day, mainly because the current program expires on June 30. is the one
Demand for dollars from importers is likely to remain constant due to import restrictions. In the coming week, we don’t see the rupee moving beyond the 288 level [in the interbank market],” said a forex trader.
“However, the rupee appears weaker in the open market due to weaker dollar and increased demand,” the trader added.
The rupee fell to an all-time low of 310 against the dollar in the open market on Friday. Against the dollar, it depreciated by Rs 5 over the past week.
The exchange rate differential between the open and interbank markets widened to around Rs 25, which could encourage overseas Pakistani workers to use illegal means to send money home.
In the week ended May 19, Pakistan’s foreign exchange reserves, a key indicator of economic health, fell by $206 million to $9.7 billion. Reserves of the State Bank of Pakistan decreased by $119 million to $4.2 billion.
Specifically, commercial bank deposits fell by $88 million to $5.5 billion, indicating an outflow of wealth.
“While the interbank is still in range, gray market rates are set to rise further as most of the informal imports are being settled through the same market,” Tracemark said in a weekly note.
The political upheaval seems to be reaching its climax. As seen in other precedents such as Sri Lanka, a reduction in political temperature will be important for the economy. Inflation (CPI) for May is expected to rise to around 39% but will start easing from there due to higher base effect and softer global commodities.
To influence the IMF, Finance Minister Ishaq Dar met US Ambassador Donald Bloom for the second time in two months. Dar confirmed that Pakistan would not default.
Pakistan faces $2.3 billion in critical debt repayments in June.
According to analysts, the country is relying on China’s help to clear the debt, although it is estimated that a portion of the debt is still due and will be repaid in a few days/weeks.
