KARACHI, (MANEND NEWS): During midday trading on April 11, 2023, the US dollar rose to PKR 287.75, resulting in a decline of 66 paisas for the local currency.
The previous day’s exchange rate for the Pakistani rupee was PKR 287.09 to the dollar. The rupee hit an all-time low of PKR 287.85 against the dollar on April 5, 2023.
There are several factors contributing to the recent depreciation of the rupee. Firstly, the cancellation of the finance minister’s visit to the US for IMF and World Bank meetings, despite Saudi Arabia’s assurance of providing aid, may have affected the currency’s value. Additionally, political uncertainty surrounding provincial elections has disappointed the currency market. The IMF deal for inflows of $1.2 billion under Extended Fund Facility (EFF) is also uncertain, adding pressure to the rupee.
The State Bank of Pakistan’s foreign exchange reserves decreased by $55 million to $9.76 billion on March 31, 2023, from $9.815 billion the previous week. This represents a decline of $17.468 billion since August 27, 2021, when reserves reached an unprecedented high of $27.228 billion. The official reserves of the State Bank of Pakistan also fell by $36 million to $4.208 billion in the week ending on March 31, 2023, compared to $4.244 billion the previous week.
Although the foreign exchange reserves of the State Bank of Pakistan still exceed the level required to provide more than one month’s worth of import cover, they have fallen below the ideal level of foreign exchange reserves equivalent to three months’ worth of import payments. The recorded import bill for March 2023 was $3.828 billion.
The decline in the value of the PKR can be attributed to economic challenges, political uncertainties, and depleting foreign exchange reserves. Although the PKR had strengthened against the dollar due to a significant contraction in the current account deficit, a lack of inflows has put pressure on the currency. Pakistan has witnessed an 11% decline in remittances during the first nine months (July-March) of fiscal year 2022/2023 to $20.53 billion, down from $23.02 billion during the same period in the previous fiscal year.
Pakistan’s foreign exchange crisis persists due to a decrease in foreign exchange reserves, a widening current account deficit, and delays in obtaining loans from international organizations such as the IMF. Despite seeking financial assistance, the country faces challenges in managing its foreign exchange reserves and stabilizing the value of its currency.