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Rupee declines over political, economic turmoil

Rupee declines over political, economic turmoil

KARACHI: The rupee shed its value against the dollar on Tuesday, as the political tension rises coupled with the shortage of the foreign currency in the market, dealers said.

The local unit lost Re1 to close at Rs217.66 against the dollar from Monday’s closing of Rs216.66 in the interbank foreign exchange market.

The analysts said that the rupee declined as the greenback has strengthened against major currencies, besides the political tension in the country, which dented the investors’ confidence.

The political environment also heated up in the country as Pakistan Tehreek-e-Insaf (PTI) leaders are being charged in different cases. The political instability in the country is of much significance for improving the investors’ sentiments.

Additionally, the government lifted the ban on the import of non-essential and luxury items to meet the condition of the International Monetary Fund (IMF) for the revival of the Extended Fund Facility (EFF) programme, which also played a role in increasing pressure on the local unit, they added.

After the reports of Saudi Arabia helping Pakistan with financial support, Qatar is also expected to provide funds worth $2 billion in bilateral support to help ease Pakistan’s funding crunch and consequent risk of default, however these reports also failed to uplift the sentiments in the market.

SBP Deputy Governor Murtaza Syed, in a briefing said that Pakistan’s funding gap of $4 billion will be fulfilled through $2 billion funds from Qatar, $1 billion from Saudi Arabia, and a similar amount from the UAE.

Pakistan has been facing a constant challenge to boost its foreign exchange reserves to provide stability to the value of the rupee. Although the foreign exchange reserves held by the State Bank of Pakistan (SBP) witnessed a growth of $67 million, to reach $7.9 billion during the week ended August 12, it still is not enough to cover the import bill for three months.

The total liquid foreign reserves held by the country stood at $13.61 billion. The net foreign reserves held by commercial banks amounted to $5.72 billion.

The country’s current account deficit has also narrowed during July on the back of lower import bill. The trade deficit came in at $2.64 billion in July, down 47 per cent or $2.32 billion on a month-on-month basis.

The country’s current account deficit rose 531 per cent to over $17 billion during the fiscal year 2022 due to massive increase in goods import bill. Overall, the current account deficit was $17.4 billion during the fiscal year 2022, compared with $2.8 billion in the fiscal year 2021, depicting an increase of $14.6 billion.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs12.81 or 6.25 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs217.66.

At the open market, the buying and selling of the dollar was recorded at Rs220 and Rs222.5 at 4:45pm PST.

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