Rupee to continue upward trend against US dollar

ISLAMABAD: The Pakistani rupee it will continue its upward trend against the US dollar despite some challenges ahead.

According to a report published in Khaleej Times, analysts and market experts said the currency will be a major beneficiary of higher GDP growth, rising foreign exchange reserves and consistent remittances inflows of over $2 billion during the first eight months of the current financial year (8MFY21).

The rupee has so far appreciated 1.7 per cent against the dollar this year and closed at 157.12 on the interbank market on Friday. Against the UAE dirham, it ended slightly up at 42.77 against 43.6 on January 8, reflecting an appreciation of 1.9 per cent.

“The Pakistani rupee has returned to stability chiefly due to higher remittances, debt relief on account of Covid-19 payment relief plan and economic rebound in the country,” experts said.

According to the latest data released by the State Bank of Pakistan (SBP), Pakistan’s economy is expected to post 2.5 per cent GDP growth in the current fiscal year ending June 2021 after contracting 0.4 per cent last year as the government’s policy measures start yielding positive results.

The country registered a 24 per cent year-on-year increase in workers’ remittances to $16.5 billion during the July 2020-January 2021 period, while foreign exchange reserves rose to $20.13 billion during the week ended February 26 from $20.04 billion a week ago, according to the SBP. “The forex reserves held by the central bank increased $70 million to $12.978 billion due to the government’s official inflows. The foreign exchange reserves of commercial banks also increased to $7.155 billion from $7.132 billion,” the SBP said.

The central bank data also showed that Pakistan’s current account deficit shrank by 55 per cent on a year-on-year basis to $229 million in January from $512 million in the same month last year due to rising exports and higher remittances.

Pakistan Kuwait Investment Company Research Head, Samiullah Tariq, said the rupee is likely to appreciate against the US dollar on account on positive economic indicators as well as stability in the economy.

“The main reason for the rupee’s appreciation is stronger inflows under Roshan Digital Accounts and higher remittances during this financial year. Pakistan has also started availing certain lending facilities to pay for petroleum products,” he added.

To a question, he replied that the resumption of the IMF plan will further strengthen the rupee in the near future. “The IMF plan is expected to firm up repayments of existing loans as well as strengthen forex reserves of the country,” he said.

About the impact of Financial Action Task Force’s (FATF’s) decision to keep Pakistan on the grey list, Tariq said the currency will not be impacted by this — be it grey or white.

“I think that we are already seeing significant inflows despite being in the grey list. Supply of the US dollar is getting better with the introduction of new channels for inflows and liberalisation of the forex regime, so those seem more important than FATF at the moment,” he said.

Pakistan Business Council Vice President for Finance, Muhammad Nafees, said the value of a currency is directly related with the current account position.

“The Pakistan economy is getting better every day. An increase in remittances from overseas Pakistanis, investment in Roshan Digital Accounts, increase in exports and decrease in import of non-essential items have contributed to the increase in the value of the currency,” he said.