KARACHI: The Pakistani rupee remained almost flat against the dollar on Monday, amid a hike in the key policy rate, besides delay in the negotiations with the International Monetary Fund (IMF), dealers said.
The exchange rate shed 1 paisa against the dollar to reach Rs223.95 from Friday’s closing of Rs223.94 in the interbank foreign exchange market.
Currency experts said that the local unit remained stable post the announcement of the State Bank of Pakistan (SBP) where it raised the policy rate by 100 basis points to 16 per cent.
The increase in the policy rate is expected to discourage the manufacturing sector to import raw material at high borrowing cost.
The central bank in the statement said that inflationary pressures have proven to be stronger and more persistent than expected. The increase is aimed at ensuring that elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis.
Pakistan’s dialogues with the IMF have also been delayed for the ninth review as the country is in a dire need of inflows to meet its payment obligations.
The government is scheduled to repay around $1 billion against Sukuks in December 2022, likely to increase pressure on the exchange rate.
The foreign exchange reserves held by the State Bank of Pakistan fell $134 million to reach $7.82 billion during the week ended November 18, compared with $7.95 billion on November 11.
According to the central bank, the decrease in reserves came due to external debt repayment.
The overall liquid foreign currency reserves held by the country, including the net reserves held by banks other than the SBP, stood at $13.64 billion, while the net reserves held by banks amounted to $5.81 billion.
The net foreign direct investment (FDI) in Pakistan slumped 62 per cent to $95 million in October 2022, compared with $247.3 million in the same month last year. However, the net FDI was up 13 per cent, compared with $84 million recorded in September 2022.
During the first four months of fiscal year 2023, the net FDI dropped 52 per cent year-on-year to $348 million, compared with $726 million during the same period of last fiscal year.
The workers remittances have also declined 15.7 per cent to reach $2.21 billion in October, compared with $2.62 billion in the same month of the last year.
On a monthly basis, the remittances witnessed a decline of 9 per cent, compared with $2.43 billion received during September.
The textile exports declined 15.2 per cent to reach $1.35 billion in October, compared with $1.6 billion in the corresponding month of the last year.
On a monthly basis, the exports declined 11.1 per cent with a major decline in components including cotton cloth, knitwear, bedwear, towels, and readymade garments.
The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs19.10 or 9.32 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs223.95.
At the open market, the buying and selling of the dollar was recorded at Rs228.7 and Rs230.95 at 4:45pm PST.
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