Pakitan rupee’s rollback versus the dollar entered the sixth day on Monday as it lost 0.11% in the interbank trade, mostly owing to scantyforeign exchange reserves amid muted concerns over a possible default.
The rupee closed at 224.65 losing Re0.25, according to the State Bank of Pakistan (SBP).
Dealers don’t see the rupee bucking the trend until deposits from Saudi Arabia’s development fund are released to Pakistan.
The country’s foreign reserves have declined to the lowest level in nearly four years with only enough to cover about a month of imports.
The forex reserves held by the SBP fell $784 million to $6.7 billion as of December 2. With a sharp reduction in the reserves, the country struggles to meet external financing needs.
They also added that the market is likely to absorb the shocks of low foreign exchange reserves as the central bank has spun into action to allay the situation.
Dealers also raised concerns over the rise of the black market, where the dollar is reportedly trading at over Rs240.
In a recent podcast, SBP Governor Jameel Ahmad said Pakistan would continue to make timely loan payments while inflows were expected to increase significantly in the second half of the current fiscal year.
The SBP had repaid two commercial loans totalling $1.2 billion. The banks were expected to refinance the same amount, in the coming days, helping to raise the country’s foreign reserves, Ahmad stated.
“The government is also in talks with a friendly country for the disbursement of a $3 billion loan and negotiations with multilateral agencies are progressing, for further financial support,” he added.
The debt profile of Pakistan is composed of bilateral and multilateral creditors and only a small percentage is owed to foreign banks. “SBP has enough reserves to repay all obligations in an effective manner,” he claimed.
For the fiscal year 2023, around $33 billion have to be repaid to external stakeholders, including the current account deficit of $10 billion and $23 billion in loan repayments. Out of the payable $23 billion external debt, Pakistan has already repaid more than $6 billion, according to the SBP’s governor.
“Besides this, a bilateral loan of $4 billion has been rolled over with the cooperation of relevant countries. Another $8.3 billion maturing obligations are expected to be rolled over as discussions are underway. The remaining outstanding repayment stands around $4.7 billion for the remainder of this fiscal year,” he said.
It includes $1.1 billion in commercial loans that have to be paid to foreign banks and $3.6 billion in multilateral loans. Pakistan has received foreign exchange inflows of $4 billion (excluding the rollovers of $4 billion).
Analysts said the interbank market largely remained range bound though there was action in the open market. There is a shortage of dollars in the kerb market.
The dollar around the world firmed on Monday after data showed producer prices in the US rose more than expected last month, pointing to persistent inflationary pressures and stoking fears the Federal Reserve would need to keep rates higher for longer, Reuters reported.
The Fed once again takes centre stage and is widely expected to raise rates by 50 basis points, though the focus would be on the central bank’s updated economic projections and Fed Chair Jerome Powell’s press conference.
Against a basket of currencies, the US dollar index eked out a 0.04% gain at 105.09.