Central bank also warned money market of strict monitoring
The rupee regained some of its previous lustre because of the intervention of the State Bank of Pakistan, Federal Minister for Planning and Development Asad Umar admitted on Thursday.
The PTI government has promoted floating exchange rates in the past and criticised the previous government for pumping cash into the money market.
Umar said that the Pakistani currency appreciated against the US dollar in the wake of the central bank’s intervention and the warning that the market was being strictly monitored.
The US dollar dipped by 94 paisas to settle at Rs168.18 on Thursday. Dealers said that the US dollar lost its value in the open market by Rs1.5, settling at Rs169.
On Wednesday, the value of the rupee had declined to Rs169.12.
The State Bank is authorized to intervene if it found traders colluding to manipulate the dollar rate, the federal minister said.
The apex bank’s powers, he said, were also integral to an agreement with the International Monetary Fund (IMF).
He explained that the central bank should intervene if it determined that the market was moved by rumours or the money market was moving in a direction detrimental to national interests. He said that the IMF had agreed with the government on these principles.
Although Umar admitted to the state bank’s intervention he also said that he was unaware of the details.
“I do not know if any intervention occurred or if it did not, what was its value or why the central bank moved to intervene … I have no information in this regard,” Asad Umar said responding to questions during a meeting of the Senate standing committee on planning.
Some reports claimed that the government had injected US$1.2b in the market to stabilize the rupee.
When Senator Dinesh Kumar complained that Balochistan had been overlooked in CPEC projects, the federal minister said that the government had announced an Rs560 billion package for under-developed districts of Balochistan and the government had also set up a hospital, vocational training center and desalination plant at Gwadar were all evidence that Balochistan was not being ignored.
He also said that an economic zone would also be set up over 200 acres near Gwadar.
Umar said that there was a possibility that the Central Development Working Party (CDWP) and the ECNEC would approve the infrastructure project of the Karachi circular railway. As soon as approval was granted, work on infrastructure development would begin, the minister said.
Interestingly, the strengthening rupee propped up the bearish stock market while also pressing the gold rates down. KSE-100 Index gained 204 points and ended the day’s rally at 46,920 points while gold prices dropped by as much as Rs900 per tola.