Pakistani currency maintained its uptrend and strengthened to a fresh 22-month high at Rs153.09 against the US dollar in the inter-bank market on Tuesday after the country began the process to raise $2.5 billion by selling 5 to 30-year Eurobonds in world markets.

After the fresh gain of Rs0.95 on Tuesday, the rupee has recovered 9.1% or Rs15.34 in the past seven months since hitting an all-time low of Rs168.43 on August 26, 2020.

The rupee continued to gain ground against the greenback in the wake of a consistent surge in the inflow of foreign currencies from global sources for the past several months coupled with a limited outflow due to the Covid-19 pandemic.

The latest growth in rupee’s value came on the day the Asian Development Bank (ADB) approved $300 million in loan for Pakistan. The financing will be used to construct a 300-megawatt hydropower plant on Kunhar River in Khyber-Pakhtunkhwa by 2027. The stronger rupee has turned imports cheaper, however, it can prove to be discouraging for the country’s exports.

Market talk suggests that the rupee may touch Rs152 against the US dollar in the current cycle of strengthening. Later, it can depreciate to Rs160 by December 2021.

Pak-Kuwait Investment Company Head of Research Samiullah Tariq said the other day that exporters had continued to sell foreign currency in panic on futures counters in the inter-bank market.

Citing the key reason behind the rush to sell foreign currency, he said the traders expected overseas Pakistanis to accelerate the flow of remittances ahead of the start of Ramazan in mid-April 2021.

Historic evidence suggests that worker remittances soar before the beginning of Ramazan every year. A leading banker estimated remittances at around $2.4 billion in March. Remittances grew 24% to $18.74 billion in the first eight months (July-February) of current fiscal year compared to $15.1 billion in the same period of last year.

Besides, the additional inflow of remittances worth around $700 million through the Roshan Digital Account (RDA) since September 2020 has also supported the rupee in gaining ground.

On the other hand, the importers held back from buying dollars from futures counters waiting for further strengthening of the rupee. The development has also kept the rupee at higher levels.

“Recent trends suggest that the current account (the country’s foreign income and expenditure) will be very much balanced or show a nominal deficit for March. This will be another positive development for the rupee,” Tariq said.

The rupee has continued to strengthen since reports emerged that Pakistan was resuming the International Monetary Fund (IMF) loan programme worth $6 billion. Soon, the IMF will release its third loan tranche of $500 million for Pakistan.

Besides, the World Bank and ADB have approved $10-12 billion each for Pakistan for the next five years, another market expert said.

Pakistan’s foreign currency reserves have stood at around three-year high of $13 billion for the past couple of months. They grew $275 million to $13.29 billion during the week ended March 19, 2021. Excessive foreign loans, however, have continued to take country’s foreign debt to new heights during the present government’s rule.

Published in The Express Tribune, March 31st, 2021.

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