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Sharper depreciation in rupee unexpected this year, says Fitch

SAMAA | - Posted: Jul 15, 2020 | Last Updated: 4 weeks ago
SAMAA |
Posted: Jul 15, 2020 | Last Updated: 4 weeks ago
Sharper depreciation in rupee unexpected this year, says Fitch

File photo: AFP

Fitch Solutions has predicted that the rupee will remain at an average of 163 against US Dollar in 2020. It doesn’t expect a sharper depreciation in rupee’s worth.

The Pakistani rupee has weakened by 7.1% since January, Fitch Ratings said in a report Wednesday.

This is because of the support from international partners such as the G20 that helped Pakistan boost its reserves. It is evident from the fact that Pakistan’s foreign exchange reserves rose by 65% to $12 billion in fiscal year 2019-20, compared to $7.3 billion in the previous year. This rise in reserves will help Pakistan ease pressures from external financing.

Pakistan’s annual trade loss has also reduced by $8.6 billion. Imports fell to their lowest level in nine years after the country raised duties and adopted measures to curb spending. It reduced the current account deficit by more than 73% in the first nine months of the year.

However, the Pakistani rupee will be weakened to an average of 171.15 in 2021, according to the Fitch analysis. This is because the demand for Pakistani assets is low.

Policymakers will likely allow for some rupee depreciation, given the lower oil prices. The oil price drop was a consequence of the coronavirus pandemic and an ongoing price war between top producers Saudi Arabia and Russia.

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