KARACHI: The rupee may get respite against the dollar during the next week, owing to expected foreign transfers under the Saudi financial package.
Further, the authorities hoped that the ongoing negotiations with the International Monetary Fund (IMF) would also be finalised for transfer of the next tranche.
The local currency during the outgoing week witnessed a record low of Rs175.27 against the dollar. However, the local unit recovered sharply on the announcement of the Saudi government to support Pakistan in the balance of payments crisis.
The exchange rate ended the week (October 29, 2021) at Rs171.65 against the greenback.
Meanwhile, the rupee during the last three sessions made a sharp recovery of Rs3.65, or 2.06 per cent, from falling to the record low of Rs175.27 on October 26, 2021.
The exchange rate ended with a gain of 61 paisas in the rupee value to close at Rs171.65 to the dollar from the previous day’s closing of Rs172.26 in the interbank foreign exchange market.
The Saudi government on October 26, 2021 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 dollars deferred oil facility to Pakistan to help its balance of payments position, an official statement said.
According to the Saudi Press Agency (SPA), the Saudi Fund for Development in a “generous gesture” announced a deposit of $3 billion with the State Bank of Pakistan (SBP) to help the government support its foreign exchange reserves and counter the impact of the Covid-19 pandemic.
The pledge of the Saudi government will help the Pakistani authorities negotiate with the International Monetary Fund (IMF) for the next tranche under the latest loan programme.
Besides, the government also plans to issue Sukuk in the coming days to generate funds to support the external sector. According to a Finance Ministry spokesman, the government plans to issue $1 billion worth of Islamic bonds in the next couple of months and the process for the Sukuk issuance would be started soon.
However, the market sentiments remained jittery due to higher payment demand for imports.
A report issued by the Finance Ministry suggested that higher import bill might persist in the coming months. According to the 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 economic activities are contributing in 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 steps taken by the government 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 Rs14.11, or 8.95 per cent, from June 30, 2021 closing of Rs157.54 to the closing of Rs171.65 on October 29, 2021.