Dollar climb continues, rises to Rs200.50 in interbank trade

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The US dollar, which had closed at a historic high of Rs200 on Thursday, extended its gains against the rupee for the 11th consecutive session today (Friday) after it gained another 50 paisa in interbank trading, even as the government moved to ban imports in a bid to arrest the rupee’s slide.

According to the Forex Association of Pakistan (FAP), the greenback was being traded at Rs200.50 around 10:45am.

The persistent decline in the rupee’s value since last Tuesday has been largely attributed to the country’s rising import bill, widening current account deficit and depleting foreign exchange reserves of the State Bank of Pakistan.

In April, imports increased by 72pc, leaving no room for the government to improve its external balance, and the foreign exchange reserves of the SBP further declined by $145 million to $10.16 billion during the week ended on May 13.

And the “dollar hoarding and speculative elements have added more fuel to the fire”, according to Mettis Global, a web-based financial data and analytics portal.

Meanwhile, analysts have also linked it to the government’s lack of clarity on its plans to arrest the decline in foreign exchange reserves and the uncertainty surrounding the release of funds by Saudi Arabia, China and the International Monetary Fund’s (IMF) bailout package.

The government has so far failed to convince Saudi Arabia, the United Arab Emirates and China for help and while negotiations with the IMF are under way, they may take long enough to further worsen the exchange rate regime.

As far as imports are concerned, the government announced an “emergency” plan yesterday under which it banned the import of nearly 800 items — all of which it deemed non-essential items — in 33 categories.

However, according to FAP chairperson Malik Bostan, the move to ban imports alone might not be able to curtail the dollar’s flight and the rupee would continue to remain under pressure until the conclusion of talks with the IMF in Doha.

“The government is taking measures but the restoration of investor confidence will take time,” he said while speaking to Dawn.com.

But FAP Secretary General Zafar Paracha was hopeful about good outcomes of the government’s measure, with his optimism finding confidence in the current account deficit shrinking to $623 million in April.

According to the SBP, the figure for April is “only two-thirds of [the] March 2022 deficit of $1,015m”.

“A rise in workers’ remittances (by $315m) and a fall in imports (by $246m) explain this reduction,” the SBP said in a tweet.

Paracha said he was expecting that the pressure on foreign exchange reserves would decrease further after the conclusion of talks with the IMF and the release of a $1 billion tranche by the international moneylender, which has been delayed since the stalling of the IMF’s programme with Pakistan in April.

Once this happened, the rupee would recover and the dollar’s flight would be contained, he said.

Meanwhile, Karachi Chamber of Commerce and Industry President Idrees Memon called for strict measures at the borders alongside curbs on imports so as to prevent smuggling, which he said could cause a loss of revenue to the government and create difficulties for local manufacturers.

He told Dawn.com that he would be meeting Prime Minister Shehbaz Sharif at 4pm today and inform him about the rupee’s free fall and challenges on the economic front.