Due to increased demand for the US currency for import payments, the rupee is expected to weaken against the dollar over the coming week, JEE News reported on Sunday.
The local unit, during the outgoing week, continued to follow a range-bound trading pattern in the interbank market, ending the week at 286.93 against the US dollar on Friday. It fell 0.25 percent against the greenback.
Tracemark said in its weekly commentary: “June, though, has traditionally been a month of heavy outflows due to defense related payments and this will lead to some volatility in the rupee which is expected to hit 290 in the coming weeks. per dollar may increase.”
“Taking into account the latest trade deficit of $2.1 billion, we have now revised the estimated current account deficit to $470 million,” it added.
The note further highlights that open market rates may remain distorted unless there is positive news or a steady stream of inflows from the International Monetary Fund (IMF) front, especially when imports Producers (other than selected industries) are asked to fix their imports. Any source other than banking channels (thus giving rise to higher gray market/referral volumes).
The government presented the budget for the upcoming financial year 2023-24 on Friday. In the realm of deficit financing, the government finds itself at a crossroads, where borrowing becomes the focal point. With a greater emphasis on domestic sources, the center aims to raise funds necessary to bridge the funding gap.
The government has earmarked 66 percent of the total expenditure for debt servicing under household debt during FY24, which is about Rs 5 trillion.
Deficit financing from domestic sources is concentrated in banking channels, about 62%. Additionally, the government expects to raise 2.5 trillion rupees ($8.6 billion) in external financing, with the majority coming from commercial and Eurobonds, according to a report released by Arif Habib Ltd.
However, we believe that securing external debt will be a formidable challenge in the current economic environment.
“Realistically, it is far-fetched to expect external borrowing of this magnitude given the imminent end of the ongoing IMF program in June,” the report said.
The prospect of negotiations for a new IMF program is fast approaching, as the finance minister has also stressed.
Dar also pointed to the possibility of re-profiling external debt that would provide immediate relief to the country’s fiscal burden by spreading repayment obligations over an extended period.
