KARACHI: The rupee remained almost stable before closing the day with a slight fall against the dollar on Thursday, amid a decline in the current account deficit during the ongoing fiscal year.
The exchange rate witnessed a loss of 6 paisas to reach Rs239.71 against the dollar from the previous days’ closing of Rs239. 65 at the interbank exchange market.
The fall in the value of the rupee came amid the US Federal Reserve’s announcement in which it raised the key US interest rate again, which took the policy rate to 3.0-3.25 per cent.
The latest hike in the policy rate has added to the dollar’s strength, and put major currencies, including the Pakistani rupee under severe pressure.
Pakistan’s current account deficit shrank 19 per cent during the first two months of the fiscal year 2023 due to a lower import bill and increase in exports.
Cumulatively, the country recorded a current account deficit amounting to $1.92 billion in the first two months of ongoing fiscal year, compared with $2.37 billion in the same period of last fiscal year, depicting a decline of $456 million, a report by the State Bank of Pakistan (SBP) showed.
The decline in the current account deficit is due to an 11 per cent surge in exports and around 2 per cent contraction in the import bill, the central bank said.
The local unit has remained under pressure throughout September, despite inflows from the International Monetary Fund (IMF), which were expected to help the government in attracting further investment and loan agreements from other multilateral institutions and friendly countries.
Although the government has had some success in securing some economic support from Saudi Arabia, it failed to provide the required stability to the exchange rate.
The announcement by the Saudi Fund for Development (SFD) for the rollover of the deposits failed to support the rupee in the interbank foreign exchange market.
The SFD has confirmed a rollover of a $3 billion deposit maturing on December 05, for one year. The deposit is placed with the SBP and is part of its foreign exchange reserves.
Additionally, the recent floods across the country have further dented the economic activities. The catastrophic floods are estimated to have caused more than $10 billion losses, as standing crops in all provinces have been destroyed.
The country’s current account and trade deficit are expected to widen in the future as the government is moving to import essential food items. The industrial activities have also been badly disrupted which will massively impact the exports of the country.
Pakistan’s trade deficit swelled 31 per cent on a month-on-month basis to hit $3.5 billion, data by the Pakistan Bureau of Statistics (PBS) showed.
Pakistan’s petroleum group imports witnessed a growth of 6.97 per cent during the first two months (July-August) of the fiscal year 2023 and stood at $3.30 billion, compared with $3.08 billion during the same period of last fiscal year.
Likewise, the foreign exchange reserves of the country have also recorded a decline on the back of less inflows and higher imports.
The foreign exchange reserves held by the State Bank of Pakistan (SBP) fell $176 million to reach 8.62 billion during the week ended September 9, compared with $8.79 billion on September 2.
The overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $14.31 billion. The net reserves held by banks amounted to $5.69 billion.
The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs34.86 or 17 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs239.71.
At the open market, the buying and selling of the dollar was recorded at Rs241.7 and Rs244.1 at 4:30pm PST.
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