KARACHI: Rupee edged 0.3 percent (53 paisas) lower for the second consecutive week against the US dollar, with a near-term stable outlook.
The local unit depreciated 0.1 percent (17 paisas) against the US dollar in the preceding week. Overall, the rupee struggled in seven out of eight last weeks on a week-on-week basis against the US dollar.
The rupee slipped from 176.24 to 176.77 against the American currency last week. The local unit has been struggling against the dollar since December last; however, it has put a brake on its free-fall spree that was witnessed in preceding months.
The rupee started last week on the back foot and depreciated on the first three days of the week. It devalued by 25 paisas (-0.14 percent) on Monday, 23 paisas (-0.13 percent) on Tuesday, and 26 paisas (-0.15 percent) on Wednesday. The lowest level of the rupee against the dollar during the week under review was recorded at 176.98 on Wednesday. However, the rupee remained firm for the next two days and closed flat on Thursday and strengthened by 21 paisas on Friday, which eroded some of the losses of the week.
The local currency struggled during the first half of the week due to uncertainty over the sixth review of the International Monetary Fund (IMF) for the $6 billion extended fund facility (EFF) programme. The IMF on Wednesday postponed for the second time its meeting to review Pakistan’s case from January 28 to February 2. The main reason behind the delay was that the State Bank of Pakistan (Amendment) Bill was not passed by the both houses of the parliament by then.
However, the government managed to get the SBP bill passed from the Senate on Thursday, which earlier sailed through the National Assembly in the preceding week. The bill will award greater autonomy to the central bank, once it is signed into act with the signature of the president of the country, which is now just a formality.
The rupee is likely to remain stable against the US dollar as the revival of the IMF programme in the coming week seems imminent because the government has met all the conditions. The Finance (Supplementary ) Act has already been passed, while the government has increased power tariffs and has promised to jack up the petroleum development levy to Rs30 per litre.
Moreover, the issuance of $1 billion sukuk by the government in the international capital market will also aid the rupee’s stability. The Monetary Policy Committee of the SBP in its meeting on Monday last left the interest rate unchanged at 9.75 percent till March and this step will also strengthen the rupee.
The support provided through $15.8 billion inflows from overseas Pakistanis as well as $3.16 billion investments through Roshan Digital Account (RDA), 5.37 percent gross domestic product (GDP) growth rate in the FY2021, and measures taken by the central bank in recent months to improve the transparency in the foreign exchange market may also improve market confidence.
