KARACHI
Pakistani rupee extended losses against the US dollar for the second consecutive week and depreciated by 1.33 percent in the interbank market and 0.71 percent in the open market.
According to details, the rupee opened at 280.57 against the greenback in the interbank market on Monday last and closed at 284.31 on Friday, going down by Rs3.74 (-1.33 percent). This was the second consecutive week when the rupee depreciated in all five sessions of the week.
On the other hand, the rupee has appreciated by Rs3.68 during the current fiscal year 2023-24, while it has depreciated by Rs52.89 in the current year.
The rupee gained Rs6.26 (+2.23 percent) against the greenback in the month of October. The currency surged more than 6 percent in September to become the top performer in the world.
Similarly, the local unit closed the week in the range of 282-285 against the dollar in the open market on Friday after opening the week at 280-283 on Monday, going down by Rs2 (-0.71 percent). Despite this weekly depreciation, the rupee has recovered by Rs47 against the dollar in the last 43 sessions in the open market.
The recent fluctuation comes after a remarkable 28-day winning streak for the Pakistani currency, which concluded on October 17, 2023. The rupee had fallen to a record low of Rs307.09 a dollar on September 5. But following a crackdown by agencies on illegal foreign exchange trading and structural reforms introduced by the central bank, the rupee had recovered every day in the interbank market since then.
The gap between rates in the interbank and open markets is required to be less than 1.25 percent under one of the structural benchmarks set by the International Monetary Fund (IMF). The IMF mission, led by Nathan Porter, is visiting Pakistan to discuss the first review of the country’s $3 billion standby arrangement (SBA).
Though the finance ministry is confident about the successful completion of the SBA review, external financing needs may come under sharp focus during the review, as the budgeted $4.5 billion loans from foreign commercial banks and $1.5 billion through issuance of Eurobonds for the current fiscal year have yet to be materialized. A successful review is crucial to pave the way for further inflows into the country, which deals with low foreign exchange reserves.
The IMF review process will be conducted in two phases. Initially, technical talks will be held, which will be followed by policy-level discussions. The country is trying to navigate a tricky path to economic recovery under a caretaker government in the wake of an IMF loan programme, approved in July, that helped avert a sovereign debt default. Under the programme, Pakistan received $1.2 billion from the IMF as the first tranche in July. A successful IMF review will pave the way for a $700 million instalment.
Meanwhile, the foreign exchange reserves held by the SBP slightly increased by $14 million on a weekly basis, clocking in at $7.5 billion as of October 27. Total liquid foreign reserves held by the country stood at $12.5 billion. Net foreign reserves held by commercial banks stood at $5 billion. The central bank did not specify a reason for the increase in the reserves. In the preceding week, Pakistan’s central bank reserves had decreased by $220 million.
