The dollar is on the rise and has reached a two-week high, up 90 paisa from the level it was trading in middle of last week.
The greenback was trading at Rs139.7 in the opening hours of trade on Monday, the level it last touched on February 27.
With more dollars flowing in from the UAE, which dispatched $1 billion to the State Bank of Pakistan last week, the dollar mostly traded at or below Rs139. However, in the last few trading sessions it went up again and is now inching towards its all-time closing high of Rs140.3, the level it hit in November last year.
In 2018, the dollar appreciated 27% against the rupee, witnessing two of its biggest ever single day jumps in the short span of one and a half months. It was one of the most volatile years in terms of exchange rate uncertainty.
Experts attribute the last year’s rise in dollar rates to our depleting foreign exchange reserves, which fell below $7 billion in December. This level was not sustainable beyond two months of import payments. The shortage of dollars had kept rupee under pressure for most of 2018 and resulted in its devaluation.
However, the government was able to secure back-to-back aid packages from Saudi Arabia and the UAE during last year’s visits of the Prime Minister Imran Khan to these friendly countries. As Pakistan started receiving these loans, the dollar became stable, especially this year.
The Saudi government has dispatched $3 billion it had pledged in support of our foreign exchange reserves. The UAE, on the other hand, has sent $2 billion and will send another $1 billion soon. China has also committed at least $1 billion to support Pakistan’s dollar reserves, which now stand at $8.1 billion.
Previously, experts had predicted the dollar may touch Rs150 but the recent dollar inflow has prevented the rupee from falling further. Presently, Pakistan is negotiating a loan package from the International Monetary Fund (IMF) but a breakthrough in talks is awaited. An IMF delegation is scheduled to visit Islamabad on March 26 and the package is likely to be agreed upon in Washington next month.
Experts say the IMF will set difficult economic reform targets for Pakistan, including a free-float exchange rate, which may result in further depreciation of the rupee. However, others argue that the rupee has already depreciated enough to reach its real value against the dollar.