During the Eid holidays, the rupee is projected to remain range-bound against the dollar, as importers and businesses are expected to raise demand for the greenback as business operations resume.
The currency strengthened in the interbank market during the previous week as Pakistanis working abroad sent more money home in remittances before Eid.
As a result, the rupee’s value surged. The local currency closed at 284.71 per dollar on Monday and 283.47 on Thursday.
“The rupee is unlikely to gain significantly against the dollar after Eid, as business activities will resume and demand for dollars from importers and companies will increase,” a currency dealer said.
The foreign currency market will be closed from April 21-25 due to Eid ul Fitr. The State Bank of Pakistan’s (SBP) foreign exchange reserves increased by $394 million to $4.432 billion in the week ending April 14.
The SBP’s reserves are hardly enough to handle one month’s worth of imports.
The acquisition of a $300 million commercial loan resulted in an increase in reserves, according to the central bank. In March, Pakistan had a current account surplus of $654 million, compared to a loss of $36 million the previous month.
The country’s current account deficit for the first nine months of the current fiscal year (July through March) was $3.4 billion, 74% less than the $13 billion deficit for the same period last year.
A weaker currency, import restrictions, and restrictions on the availability of foreign exchange, as well as fiscal tightening and higher interest rates, have all contributed to less pressure on the external current account.
The country is hoping that the International Monetary Fund (IMF) will resurrect a $6.5 billion bailout package. To make up for the gap in external finance, the IMF is seeking $6 billion in guarantees from friendly countries and multilateral and bilateral lenders.
The United Arab Emirates has pledged $1 billion in financial assistance to Pakistan, after a $2 billion pledge from Saudi Arabia. However, the global lender expects Pakistan to provide additional cash guarantees in order to get a bailout.
Although foreign exchange reserves are increasing, they are meaningless in the face of massive foreign debt repayments. Pakistan must repay approximately $3 billion in external debt by June. According to analysts, financing assurances of $3 billion must be obtained before the IMF staff-level agreement and subsequently the Executive Board approval.
