The greenback was down Rs1.9 in the interbank market and traded at Rs132
The rupee rebounded sharply on Wednesday morning after the dollar fell to its lowest level in two weeks after the news broke that Pakistan secured a $6 billion aid package from the Saudis.
The dollar traded at Rs132 in the opening hours of the interbank market, down Rs1.9 from the previous day’s closing rate of Rs133.9.
Market analysts tell SAMAA Digital it is due to the news that Saudi Arabia has agreed to provide much needed support to Pakistan, which is facing a balance of payment crisis and needs to shore up its dollar reserves.
Since taking charge this August, the PTI government has been trying to seek help from friendly countries to avoid a default on foreign payments. After much delay, the government formally requested the IMF for assistance, but also sped up efforts to secure dollar loans from friendly countries such as China and Saudi Arabia.
The kingdom has agreed to extend $3 billion in deposits and another $3 billion in oil credit to Islamabad, a government press release said on Tuesday.
Pakistan is seeking dollar loans because its imports are more than twice its exports. For every dollar coming in, two leave the country, putting pressure on its foreign exchange reserves. That means we have fewer dollars than we need to pay for essential imports (like oil, raw materials, machinery etc) that keep the economy going and to repay our foreign loans (which are more than $90 billion).
According to the latest data, the government has $8 billion in reserves, which is the lowest level of foreign exchange reserves in the last four year and is not enough to sustain even two months of imports.
The $6 billion support comes as positive trigger for the market and takes off pressure from the rupee, which has depreciated more than 20% since December. However, analysts say this fall is temporary and they don’t see dollar falling further. Since Pakistan’s gross need for dollars is very high, the country will still have to go to the IMF for additional loans, they say.
The interbank market rate is the benchmark rate to evaluate the dollar’s value, according to experts. It determines the open market rate, which usually stays slightly above the interbank rate. Trade in open the market starts at around 11am and is likely to follow the interbank market trend.