Loans from several sources approved too
The US dollar was traded for as low as Rs151.50 in the interbank market as Pakistan achieved the target of selling Euro bonds worth $2.5 billion Wednesday. The dollar rate stood at Rs152.8 by the end of the day.
The country is also receiving $500 million after resumption of the IMF programme, $1.3 million from the World Bank and $300 million approved by the Asian Development Bank.
The last time dollar sold below this level was in June 2019.
“Pakistan’s financing line is strong in coming years,” said Malik Bostan, the Forex Association of Pakistan chairperson. “The reserves will get better and that’s strengthening rupee.”
But Bostan said that rupee would come under pressure due to increase in consumer imports ahead of Ramzan and Eid. In case of increase in imports, more dollars flow out of the country to pay for import bills. As the dollar demand increases in the country, its price increases in the local currency such as rupee.
Bostan believes dollar may lose its value again in the next four or five months.
“If it crosses the Rs150 psychological barrier, then it may even go to settle around Rs145,” he said.
But another expert says rupee may appreciate against dollar in the short term but on a long-term basis rupee will again go into the depreciating mode when things return to normal once the coronavirus pandemic is over.
“The foreign exchange inflows are good, so is current account and remittances,” said Raza Jafri, the head of Equities Intermarket Securities. “It seems rupee will appreciate on short-term basis.”
Raza warned that when things return to normal after the pandemic, oil prices and imports may increase, bringing back rupee under pressure.
“The market was expecting that current account deficit would be high in February, something around $500 million but it actually came out at only $50 million,” BMA Capital’s Head of Research Faizan Ahmed said. “It also played a role in the falling rates of dollar recently.”
During the first eight months of the fiscal year 2021, the current account showed a surplus of $881 million as compared to a deficit of $2.74 billion in the same period last year.
Ahmed added that inward remittances have fared better too, contrary to the market expectations.
The remittances stood at $18.7 billion in the first eight months of FY2021 (July to February), which was 24% higher than the remittances during the same period last year.
Malik Bostan said the State Bank’s Roshan Digital Accounts initiative has also been playing an important role despite it has crossed only $800 million mark in eight months.
“I believe Roshan Digital Accounts has immense potential. The response so far is low because people are learning — both the overseas depositors and bank staff involved,” he said.
“I think we can expect $2 billion inflows from Roshan Digital Accounts alone.”