Demand for dollars is declining, experts say
The dollar rate has fallen below Rs159 after six months as experts say demand for the greenback is declining.
The demand has declined because the gray or informal market has been squeezed to bring dollars into the banking channel. Money exchangers are now buying dollars at Rs158.7 and selling them at Rs159. The dollar has seen a drop of Rs0.30 from the previous day in the open market.
Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said the demand for dollars has declined, which has in turn brought the dollar rate down.
The last time the dollar traded below this level was on May 4.
Paracha added that the State Bank of Pakistan has taken initiatives that have paved the way for foreign exchange to come in the banking channel, such as the Roshan Digital Accounts.
He added that Pakistan has strong dollar inflows due to improved remittances.
A senior research analyst explained that one of the reasons for the gradual dollar rate decline is that the greenback is weakening internationally.
Another reason, according to him, is Pakistan’s compliance with the Financial Action Task Force (FATF) recommendations. By doing this, more dollars have been flowing through banking channels and hard cash movement of foreign currency through illegal channels of hawala and hundi has been curtailed.
Another senior research analyst, Karim Punjani, says deferring of loan repayments for another six months has played a role in the rupee strengthening against the dollar.
He added that debt repayment of $1.8 billion, which was previously deferred till December 2020 in response to the coronavirus induced economic slowdown, has again been deferred for another six months, till June 2021.
However, he thinks the present trend of the dollar rate dropping may be short-lived as the rupee will again come under pressure when the IMF programme resumes in January, which was suspended temporarily due to the pandemic.
He added that pressure on the rupee will increase when Pakistan has to make debt repayments next year.