9.9 C
Islamabad
Sunday, March 3, 2024
More

    Rupee Faces Further Depreciation in Open Market Amid Dollar Shortage

    - Advertisement -
    - For Palestine -

    The Pakistani rupee is likely to face more pressure in the open market next week as a shortage of the dollar persists. However, in the interbank market, the rupee is expected to trade within a narrow range, as administrative measures are implemented to stabilize rates. The economic challenges facing Pakistan, coupled with dwindling foreign exchange reserves, are increasing the risk of default.

    Despite the government’s efforts to resume the $6.5 billion bailout program with the International Monetary Fund (IMF), the prospects for success are diminishing. The current program is set to conclude on June 30, and with each passing day, the chances of reaching an agreement are becoming slimmer.

    The demand for dollars from importers is expected to remain consistent due to import restrictions, which will likely prevent the rupee from surpassing the 288 level against the dollar in the interbank market. However, the shortage of dollars and increased demand may weaken the rupee in the open market, according to forex traders. On Friday, the rupee reached an all-time low of 310 against the dollar in the open market, reflecting a decline of Rs5 during the week.

    The exchange rate disparity between the open market and the interbank market has widened to around Rs25, potentially leading overseas Pakistani workers to resort to illegal channels for remittance transfers. Pakistan’s foreign exchange reserves, a crucial indicator of economic health, fell by $206 million to $9.7 billion in the week ending May 19. The State Bank of Pakistan’s reserves decreased by $119 million to $4.2 billion, while commercial banks’ reserves dropped by $88 million to $5.5 billion, indicating an outflow of wealth.

    While the interbank market appears to remain range-bound, grey market rates are expected to increase further as non-formal imports are being settled through unofficial channels. The political situation in the country is reaching a critical point, and reducing political tensions will be vital for the economy. The Consumer Price Index (CPI) for May is projected to rise to approximately 39%, but it is expected to gradually decrease thereafter due to the high base effect and a decline in global commodity prices.

    Finance Minister Ishaq Dar has met with US Ambassador Donald Bloom for the second time in two months to seek support from the IMF. Dar reiterated Pakistan’s commitment to avoiding default. The country is facing a significant debt repayment of $2.3 billion in June and is relying on assistance from China to manage its debt obligations, although a portion of the debt may still require renegotiation.

    - Advertisement -
    Latest news
    - Advertisement -
    Related news
    - Advertisement -

    LEAVE A REPLY

    Please enter your comment!
    Please enter your name here