PKR slips by 1.5 rupees per USD in a week

January 20, 2023 (MLN): Increasing economic uncertainty amid the absence of foreign inflows, the Pakistani rupee (PKR) keeps losing ground as the local currency lost 1.5 rupees in five straight sessions to settle the week at PKR 229.67 per USD compared to the previous week’s closing of PKR 228.15 per USD.

Within today’s session, the local unit depreciated by 51 paisa, showing an intraday high bid of 229.50 and low offer of 229.25 while in the open market, PKR was traded at 239.50/239.97 per USD.

Throughout the week, the domestic unit remained under pressure as no immediate measures were taken by the government to resolve the deal with the International Monetary Fund (IMF).

According to media reports, the fund has asked the government to share the plan/roadmap for the collection of Rs855bn through the Petroleum Development Levy (PDL). In addition, the fund also asked for the settlement of circular debt in the gas sector for which the government is compelled to raise gas prices.

The delay results in prevailing economic uncertainty for international investors in Pakistan. As per the latest data revealed by the central bank, the inflow of foreign direct investment (FDI) into Pakistan during 1HFY23 plunged by 58.7% YoY to $461 million, compared to $1.11 billion during the same period last year.

In December 2022 alone, the FDI turned negative as the total outflows stood at $17mn compared to 229.8mn inflows in December 2021.

While the current account deficit (CAD) for 1HFY23 stood at $3.67 billion, improving by 60% YoY as compared to 1HFY22. In the month of December 2022, CAD narrowed by 78% YoY to $400n whereas, on monthly basis, it worsened by 59% compared to $252mn in November 2022.

Meanwhile, the analyst fraternity is of the view that the authorities should not intervene to hold PKR/dollar parity which is one of the major conditions of the IMF for resuming talks for the release of a $1.12 billion tranche.

It is pertinent to highlight that this free fall of PKR will cost the country by Rs430 billion in terms of debts.

On the other hand, Governor State Bank of Pakistan (SBP) Jameel Ahmed is quite optimistic that Pakistan will observe the inflow of dollars from next week which will improve the position of foreign exchange reserves of the country.

While speaking to the business community at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) during the outgoing week, the SBP chief said, "Though the foreign exchange reserves of the country melted to a low level there are projects in the pipeline will that will help improve reserves.”

In FYTD, PKR lost 24.81 rupees or 10.81%, while it plummeted by 0.66% against the USD in the last seven sessions, as per data compiled by Mettis Global.

The currency lost 1.3 rupees to the Pound Sterling as the day's closing quote stood at PKR 283.89 per GBP, while the previous session closed at PKR 282.63 per GBP.

Similarly, PKR's value weakened by 99 paisa against EUR which closed at PKR 248.87 at the interbank today.

On another note, within the money market, the central bank conducted an Open Market Operation (OMO), and Shariah-compliant Mudarabah OMO today, in which it cumulatively injected a total of Rs783.20 billion into the market.

The overnight repo rate towards the close of the session was 16.15%/16.25%, whereas the 1-week rate was 15.75%/15.85%.

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