Rate stood at Rs165.50 in the interbank
A hike of Rs4.55 in the ongoing month of July in dollar rate moved the greenback up to a 40-month high. The last time dollar was at this level was on October 16 last year.
The dollar rate stood at Rs162.50 on Friday in the interbank. Experts say the increase in terrorist activities in the country and the reduction in the dollar supply after the expiry of the government’s amnesty scheme for the construction sector at the end of June were few reasons for the hike.
“The influx of dollars in the country reduced as the amnesty scheme expired in June,” said Malik Bostan, the chairperson of the Forex Association of Pakistan.
He said that the amnesty scheme for the construction helped people whiten their money hidden at home or stashed abroad in foreign banks.
According to the Securities and Exchange Commission of Pakistan, the construction and real estate sectors took the lead with the incorporation of 474 business ventures. The government has been focused on these sectors and wants to stir economic growth through it. The increase in construction activity has boosted cement sales to a historic high.
Bostan further said that the increase in terrorist activities such as the attack on a bus carrying Chinese engineers and also the kidnapping of the Afghan ambassador’s daughter had a negative impact on investment. “Such bad news turns away foreign direct investments,” he said.
He added that the increase in import payments especially for food items and machinery were pushing the dollar rate.
Bostan added that importers were also opening Letter of Credit with the banks prematurely fearing lockdown amid rising coronavirus cases. “That’s increasing demand for the dollar,” he said.
Meanwhile, Zafar Paracha, the Exchange Companies of Pakistan secretary, said that the government may have reached an agreement with the IMF to devalue the Pakistani currency.
He remarked that with the increase in Pakistan’s exports, remittances, and foreign exchange reserves in the last financial year, there was no reason for the rupee to depreciate. He said that current account deficit during the last financial year was not that big to affect the dollar rate.
Zafar Paracha said that if the government has reached an agreement to meet the conditions of the IMF, the value of the dollar could reach Rs165.
It should be noted that the value of the dollar in August 2020 was at the highest level of 168.87.