IMF Programme review delay makes market apprehensive
The dollar’s interbank rate jumped to a 16-week high to Rs157.55. The last time dollar traded above this level was on March 2.
According to experts, the main reason for the weakening rupee or dollar rate increase is the June effect. June is the last month of the fiscal year and businesspersons and importers have to fulfill their commitments before the end of the fiscal year.
“It’s mainly due to the month of June,” said Malik Bostan, the chairperson of the Forex Association of Pakistan. “Since the year is about to close, people have to fulfill their commitment of payments. For that, they need to buy dollars.”
He added that people expect taxes and duties might increase in the budget, importers start importing before the new taxes and duties become applicable with the start of the new fiscal year in July.
Bostan said that exporters also delay receiving payment receipts with expectations that the dollar rate would go up and then they would cash it. “The demand increases and so does the rate,” he said.
He said that the political tension between Pakistan and the US may have prompted the International Monetary Fund programme review to be deferred from June to September. Pakistan Prime Minister Imran Khan recently said that Pakistan would not allow US bases in Pakistan.
Another expert Zafar Parachi, the secretary of the Exchange Companies Association of Pakistan, said the dollar may not go up much and it would most likely return to the Rs155 level soon.
“Remittances are good, the stock exchange is performing well and foreign exchange reserves are at a satisfactory level. The economic indicators say the dollar may not go up much and would eventually return to the Rs155 level,” he said.