Rupee continues to depreciate in inter-bank market
KARACHI: On Tuesday, a recent descent is observed of 1.11% in rupee value, due to which accumulative depreciation is around 15.38% to a record low of Rs121.73 to the US dollar in the inter-bank market since December 2017, the reason behind is mainly growing imports and fast diminishing foreign currency reserves.
According to Pakistan Forex Association President Malik Bostan, “Traders believe the rupee may drop to Rs125 by June 30 (in the inter-bank market).”
The traders expressed the US dollar movement, by explaining the issuance of US dollars in the market, which will also continue on Wednesday.
According to the State Bank of Pakistan (SBP), “The rupee is in the weaker state due to the former PML-N government and the present interim political set-up, due to proposition to obviate mounting pressure on the country’s foreign currency reserves, which have dropped to less than two months of import cover at $10.07 billion.”
Specialists proposed, the reason behind such devaluation is to recover inactive exports & related activities, and to lower engorged imports. However, the anticipations are not in line, because imports reached a record high of $5.8 billion in May 2018.
INTER-BANK MARKET RATES: The rupee lost 70 paisas in terms of the dollar for buying at Rs 121.70 and it also shed 30 paisas for selling at Rs 121.80.
OPEN MARKET RATES: The rupee fell by 60 paisas for buying and selling at Rs 122.60 and Rs 123.60 respectively, the rupee, however, gained Rs 1.75 for buying and selling at Rs 140.00 and Rs 142.00 respectively.
Furthermore, caretaker Finance Minister Dr Shamshad Akhtar initiated tax amnesty scheme, based on the first dollar-based savings certificates for overseas Pakistanis. This scheme is a tool for addition in foreign currency reserves by $1 billion to $4 billion.
Also, the government has estimated to receive another $500 million to $1 billion in the next one year through the launch of dollar-based savings certificates for overseas Pakistanis.
The depression rupee is pushing central bank to increase its key policy rate, giving credit to the private sector in more expensive manner and also undue effect at the economy.
The devaluation will result in expensive imports due to higher oil prices in the international market. Pakistan relies heavily on imported fuel oil, which comes to almost one-fourth of annual imports.