Trade deficit pushing the dollar rate up
The dollar rate hit a 13-month high of Rs168.6 in the open market according to the data released by the Forex Association.
The dollar rate rose by as much as Rs0.8 on Tuesday to push it near a level last seen on August 6, 2020.
Analyst Raza Jafari told SAMAA Digital that during the month of August imports increased, pushing the trade deficit to $4.2 billion – the highest-ever level in the country’s history.
If imports continue to rise, domestic dollar reserves will further fall, subsequently pushing the dollar rate up.
Jafari said that Pakistan had sufficient dollar reserves for paying the import bills over the next three months but it also needed to take steps to curb imports of luxury goods such as cars. The IMF’s program has also been suspended for the past six months. If the IMF program resumes, there will be some improvement in the exchange rates, he added.
Analyst Sharoon Ahmed said that Pakistan’s imports are increasing rapidly because of which pressure on the dollar is increasing and the rupee is depreciating.
Speculating on this issue, he said that it is possible that Pakistan and IMF have reached an agreement and the international agency might have asked Pakistani authorities to devalue the rupee.
He also said that an increase in the trade deficit could also be a reason behind increase in dollar value.
Malik Bostan, the chairman of the Forex Association, said that the United States had frozen several Afghan bank accounts since the Taliban took over Afghanistan leading to large-scale smuggling of dollars from Pakistan to Afghanistan. The price of dollar is constantly rising in Afghanistan and people are buying dollars from Pakistan and selling them in Afghanistan to earn a huge profit.
He said that the money market had also opened in Afghanistan and people were selling bonds to buy dollars. The demand for the US greenback is high there, he said.
According to him, businesses and universities in Afghanistan were starting to open. This, he said, had changed the unstable situation in Afghanistan and it would also have a positive impact on Pakistan.