As the IMF’s USD 3 billion stand-by arrangement initiated its first review on Thursday, the Pakistani rupee (PKR) experienced a declining trend against the US dollar, casting uncertainty on future prospects, Dawn reported on Thursday.
The greenback had appreciated over the past eight sessions, but Wednesday’s increase of PKR1.18 eroded the confidence of both importers and exporters.
Some currency experts accused banks of deliberately manipulating exchange rates to profit from higher dollar rates. However, Atif Ahmed, an interbank market currency dealer, defended the banks, attributing the rising dollar price to the shrinking supply and increasing demand.
“This is a false allegation. It is a matter of supply and demand. The supply is shrinking while the demand is on the rise, pushing the dollar price,” he said.
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The State Bank of Pakistan (SBP) reported the closing price of the dollar at PKR 282.65 from PKR 281.47 a day earlier, a depreciation of 0.42%.
The exporters had ceased selling their dollar holdings, leading to higher rates, dawn reported, citing sources.
“The higher offers have changed the market sentiment, which needs to be stopped to check the rupee’s depreciation,” said Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan.
Paracha pointed out that the supply of dollars had decreased in October due to limited export growth, emphasising the importance of maintaining the positive sentiment achieved after the crackdown on illegal currency businesses in September.
In the open market, the dollar also rose by 50 paise to close at PKR 283.50. Exchange companies, however, claimed to continue selling dollars to banks. A senior banker noted that the interbank market was not only serving importers but also meeting the SBP’s demand for dollars to facilitate debt servicing, dawn reported.
The central bank’s efforts to maintain foreign exchange reserves around the $8 billion mark before negotiations with the IMF were ongoing.
Finance Minister Shamshad Akhtar expressed confidence in successfully negotiating for the release of the $710 million second tranche from the IMF, citing improved economic performance in the first quarter of the current fiscal year as a basis for this optimism.
Source: ANI
