KARACHI: An increase of US$1.2billion has been reported in foreign currency deposits of commercial banks in a period of last four months. According to sector experts, the increase in demand of the US$ has been fueled by speculation of a probable devaluation of Pakistan Rupee (PKR), which has resulted in a sudden rise in forex reserves of commercial banks.
The Summit Bank, Vice-Chairman, Husain Lawai said “Local currency deposits of banks have gone down. They fell Rs329billion in the first two months of 2017-18. It shows where that money has gone.” Pakistanis have started to accumulate dollars in foreign currency denominated accounts, in anticipation of a depreciation in the PKR, a local newspaper said.
He added that PKR would likely devalue in the range of 6-8 percent but could rise to 12 percent in case the government plans to approach International Monetary Fund (IMF) for another bailout.
Ongoing court proceedings against Finance Minister Ishaq Dar for corruption has left currency dealers anxious because his declining influence has made a devaluation of PKR imminent.
On July 5, PKR fell sharply both in the interbank and kerb market to reach a 2.5 year high of Rs108 from Rs104.91 the previous day. The PKR had remained relatively stable since August 2015, and according to a Topline Security report, the currency devalued annually by 5 percent in the last decade.
Dar, till now has vociferously opposed the devaluation of the PKR. According to Lawai, the fall in SBP’s forex reserves is alarming.
Currently, the government is preparing to raise $1billion from the international debt market as it also faces a hefty payout of $800million on account of penalty damages to be paid to Karkey on account of failing to honour its rental power plant agreement.
