Defying market expectations for monetary stability following receipt of $ 3 billion in aid from Saudi Arabia, the rupee continued to lose ground against foreign currencies as it hit a new all-time low of Rs 177.43 against the US dollar on the interbank market on Wednesday.

The rupee had closed at 176.79 rupees on Tuesday, posting a decline of 0.36% (or 0.64 rupees) on Wednesday, according to the State Bank of Pakistan (SBP).

Saudi Arabia’s $ 3 billion receipt on Saturday last week for a deposit at the State Bank was expected to support the rupee’s recovery and stabilize it at around 175.

In the open market, the local currency fell to Rs 179 per dollar, according to the Association of Exchange Companies of Pakistan (ECAP).

Pakistan’s current account deficit is expected to widen from $ 2 billion to $ 2.5 billion in November following a surprising increase in the import bill to a record high of $ 8 billion.

“The planned checking account number is unsustainable. It is costing the rupee dearly, ”Tahir Abbas, research director of Arif Habib Limited (AHL), said in an interview with The Express Tribune.

ECAP President Malik Bostan said the financial crisis in neighboring Afghanistan is accelerating the decline in the value of the rupee against the dollar.

Commodity prices in Afghanistan are significantly higher than in Pakistan. Likewise, one US dollar in the neighboring country is available for 10 rupees more than in Pakistan.

“This situation encouraged the smuggling of goods and currency along the Pakistani-Afghan border,” he said and noted that smuggling of goods to the neighboring country led to an increase in the import bill from Pakistan. .

The Pakistani currency has depreciated 16.52% (or Rs 25.16) in the past six months from the 22-month high of Rs 152.27 recorded in May 2021.

Since the start of the current fiscal year on July 1, 2021, the Rupee has fallen 12.62% (or Rs 19.89) from the opening level of Rs 157.54.

Bostan revealed that the price of wheat flour in Afghanistan was more than double that of Pakistan, prompting smugglers to send shipments of flour to Kabul, leading to increased food imports into Pakistan.

The Taliban government in Afghanistan urgently needs dollars to run the country. However, the United States has denied access to Kabul’s foreign currency reserves, in the amount of approximately $ 10 billion, which are parked in American banks.

He said workers’ remittances fell to $ 2.5 billion in October 2021, from around $ 2.7 billion in the previous months.

“The drop in remittances came as the Hawala / Hundi operators were operating in border areas,” he said. The decline in workers’ remittances also contributed to the depreciation of the rupee, he said.

Bostan said foreign exchange firms were providing the interbank market with between $ 300 and $ 400 per month due to oversupply on their side, but that amount fell to around $ 200 million in the current month. He pointed out that the hawala-hundi operators offered a better price, so there was a drop in remittances through official channels.

He said the Pakistan Exchange Exchange Companies Association explained the situation to senior officials in the country, including financial adviser Shaukat Tarin, business adviser Razak Dawood and the governor of the State Bank of Pakistan, Reza Baqir. . According to him, they promised to control contraband and take appropriate action against it.

Abbas said the recent drop in international oil prices would help lower Pakistan’s import bill. In addition, the upcoming mini-budget is expected to introduce measures to reduce the import bill by imposing regulatory fees and increasing tariffs.

The mini-budget is expected to be unveiled this December and the measures it contains would support the stabilization of the rupee.

According to him, there was no room for a high rupee depreciation. The national currency is expected to stabilize around Rs 175-176, he said.

Posted in The Express Tribune, December 9^e, 2021.

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