KARACHI: The Pakistani rupee extended its gains against the dollar on Wednesday, amid a reduction in the import bill, besides expectations that Finance Minister Ishaq Dar will take effwective measures to control the exchange rate, dealers said.
The exchange rate witnessed a gain of Rs1.7 to reach Rs223.94 against the dollar from the previous day’s closing of Rs225.64 at the interbank exchange market.
Analysts said the market sentiments remained positive as the country’s trade deficit witnessed a decline during the first quarter of the ongoing fiscal year owing to tapering imports.
The trade deficit in the first quarter of fiscal year 2023 narrowed 21.4 per cent to clock-in at $9.2 billion, against $11.72 billion recorded in the same period of the last fiscal year.
During the quarter, imports declined 12.7 per cent, to $16.3 billion, as against $18.72 billion in the same period last year. However, exports were up 1.8 per cent to $7.12 billion, compared with $6.99 billion in the same period last year.
Additionally, with the appointment of Ishaq Dar as the new finance minister, the market participants expected stability in the value of the local unit. Dar is known for keeping the exchange rate under control.
The exporters have also opted to sell the dollar after Dar said that strengthening the rupee was his main objective.
An ease in the current account deficit was also witnessed during the current fiscal year. 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.
However, the current rally of the rupee is likely to be short-lived as the macroeconomics of the country are deteriorating where the foreign exchange reserves of the country witnessed a significant decline.
The foreign exchange reserves of the State Bank of Pakistan (SBP) fell $341 million, clocking in at an alarming level of $8 billion during the week ended September 23, compared with $8.34 billion on September 16.
The total liquid foreign exchange reserves held by the country stood at $13.76 billion. The net foreign reserves held by commercial banks amounted to $5.76 billion.
The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs19.09 or 9.31 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs223.94.
At the open market, the buying and selling of the dollar was recorded at Rs226 and Rs228 at 3:45pm PST.
