KARACHI: The rupee is on a path of recovery after falling to record low of Rs175.27 against the dollar on October 26, 2021. However, the latest trade numbers suggested the import bill is still very high.
During the ongoing week, the local currency ended at Rs170.01 against the dollar in the interbank foreign exchange market. It recovered Rs5.26, or 3 per cent, till November 5, 2021 after falling to the record low.
The rupee recovered sharply after an announcement made by the Saudi government last week to support Pakistan’s balance of payments position.
Saudi Arabia announced an additional support of $3 billion to Pakistan for building its foreign exchange reserves. The additional financial support is besides a $1.2 billion deferred oil facility to Pakistan to help its balance of payments position, an official statement said.
Though the support pledge has positively impacted the rupee value, the large external payments are still a major threat for the stability of the local currency.
The Pakistan Bureau of Statistics (PBS) issued trade numbers during the outgoing week, which revealed the trade deficit widened by over a 100 per cent.
The import bill registered a growth of 65.15 per cent to $25.06 billion during July-October 2021, compared with $15.17 billion in the same period of the last fiscal year, the PBS data showed.
Similarly, the exports of the country also grew 25 per cent to $9.44 billion during the period under review, compared with $7.57 billion during the same period of the last fiscal year.
Since Pakistan is a net importer of various commodities and other finished products, the international price hike would further escalate the demand for the dollar, which would also result in weakening of the local currency.
A report issued by the Finance Ministry suggested that higher import bill might persist in the coming months. According to official data, imports of goods and services in September were marginally lower than their levels observed in August.
The persistent rise in the international oil prices, exchange rate pressure and the rise in the domestic economic activities are contributing to the rising import demand.
“Given these recent dynamics, it can be expected that in the following months, imports may remain at the current high levels,” the Finance Ministry said.
Therefore, the recent government steps in terms of monetary policy and the measures taken to discourage unnecessary imports will be helpful in containing the strong expansion recorded in recent months, it added.
The rupee remained under pressure since the start of the current fiscal year. The local currency fell Rs12.47, or 7.91 per cent from June 30, 2021 closing of Rs157.54 to the closing of Rs170.01 on November 5, 2021.
