Dollar inflows reduced as crisis in Afghanistan worsens
The US Dollar reached a ten-month high and was being traded at Rs164.20 on Monday amid the political crisis in neighbouring Afghanistan.
The last time dollar was recorded at this level was in October 2020. At the end of the trading day on Monday, August 2, its value appreciated by Rs1.60.
Zafar Paracha, executive director of the Paracha Exchange and secretary Exchange Companies of Pakistan (ECAP), told SAMAA Digital that Pakistan normally imports $4 billion of goods in a month, but in June this year, Pakistan imported goods worth $6 billion.
The country imported machinery in June as well, he pointed out. Machinery is an item that is not consistently imported, which means its imports generally have a one-off impact and import bills may come down in the coming months.
Paracha added that the withdrawal of US troops from Afghanistan and the Taliban’s increasing presence in the landlocked country has made the law and order situation in the region uncertain. It has raised security concerns in Pakistan as well.
“This precarious situation in the neighbouring country has halted Pakistan’s exports to Afghanistan which has reduced our dollar inflows,” he said, adding that Pakistan’s exports, remittances, and foreign exchange reserves have increased in the last financial year. There is no reason for the rupee to depreciate. Dollar will eventually return to somewhere between Rs155 and Rs158 within a month.
According to Forex Association of Pakistan Chairperson Malik Bostan, the government is set to import 100 million coronavirus vaccine doses in the upcoming months.
“The payment in dollars for imports increased its demand and pushed up its price,” he said. “The trade deficit in FY2020 was about 33% higher than that in FY2019, which has also depreciated rupee against the dollar.”
It should be noted that the value of the dollar in October 2020 crossed the Rs164 mark.