Business

Continuous fall in rupee value: Pakistan’s only option is to request IMF to review condition

Published

1 year ago

Farwa

IMF set limit of 1.25% between interbank, open market rates.
Interim PM selects economic experts to deal with economic woes.
Open market has witnessed nosedive in rupee value against dollar.

ISLAMABAD: With continuous fall in the exchange rate, Pakistani authorities have been left with no other option but to request the International Monetary Fund (IMF) to review the Fund’s condition of keeping the difference between interbank and open market dollar rates not more than 1.25%, it emerged on Tuesday.

Amid massive fluctuations in the currency market in recent days, the Ministry of Finance and the State Bank of Pakistan (SBP) were silent over the depreciation of the rupee against the dollar.

However, many official sources claimed that the newly-appointed Minister for Finance Dr Shamshad Akhtar is currently busy getting briefings from different ministries before finalising a prescription to fix the economic ills.

The caretaker prime minister has selected two economic experts, Dr Shamshad Akhtar and Adviser on Finance Dr Waqar Masood, to deal with the economic challenges.

The IMF’s Standby Arrangement (SBA) programme of $3 billion placed a continuous structural benchmark under which the average premium between the interbank and open market rate will be no more than 1.25% during any consecutive five business-day period.

“This flawed structural benchmark has changed dynamics of the currency market as the open market rates will start driving the exchange rate against the earlier practice that interbank used to be the driving force behind the exchange rate fluctuations,” top official sources confirmed while talking to The News.

Now the open market has witnessed a nosedive in rupee value against the dollar and the rate hovered around Rs310 to Rs315 depending upon those who possessed valid traveling documents, including passport, visa and air tickets and those who are just buying dollars owing to speculations.

On the other hand, the interbank market also witnessed an all-time low of Rs299 against the US dollar in the interbank market.

“This practice might continue if the IMF condition for keeping the rate between interbank and open markets not more than 1.25% intact because it has changed the dynamics of Pakistan’s currency market. Now the caretaker government will have to make a request to the IMF for review of this policy structural benchmark,” said a top official.

The SBP has been continuously breaching this condition for the last several days and there is no limit to keep the exchange rate stable keeping in view the volatile environment when Pakistan is desperate to attract dollar inflows at a time when the outflows exceed the inflows with substantial margins.

Pakistan has obtained $2.8 billion in the shape of time deposits and guaranteed loans from China as well as from other multilateral and bilateral creditors. There is another $2.2 billion received by the SBP from the IMF and other bilateral creditors to shore up the foreign exchange reserves but this kind of dollar inflows failed to stabilise the exchange rate.

The currency market remained unstable owing to various factors, including the removal of restrictions on imports after which the current account deficit surged to $1 billion in July 2023. Remittances and exports also dropped against the envisaged targets. All these circumstances put pressure on the exchange rate when the macroeconomic fundamentals are not up to the desired mark.

When contacted, former adviser Ministry of Finance Dr Khaqan Najeeb on Tuesday said that in the short term, the rupee is adjusting due to higher import numbers, clearance of backlog for containers. Falling inflows of remittance and exports and the interbank market doing a catchup with the kerb market in the hope of fulfilling an IMF structural benchmark.

An uncomfortable SBA that may need reconsideration is specifying that 1.25% difference will not be breached between kerb and interbank for five days in a row. Data does point to the breach of the continuous structural benchmark and is appearing hard to maintain, he maintained.

He felt importers are relying on the kerb market as liquidity remains constrained in the interbank. This along with dollar buying as a safe store of value keeps the kerb market rising and the interbank following the rising trend to close the gap between the two rates. He concluded by saying that creating certainty, and a response giving clarity on future economic plans and strategies for meeting the IMF targets by authorities, is necessary.

Business

Report: Solar is expected to set new records this year.

Published

8 hours ago

Farwa

In 2023, there was an expected 87% increase in growth. This year’s increase is 29% over the previous one, according to the research.

The cheapest source of electricity globally is solar power, and as such, it is expanding quicker than many anticipated, according to Euan Graham, an Ember electricity data analyst.

Ember estimates demonstrate the rapid growth of solar energy: in 2024 alone, new solar capacity will surpass the 540 GW of additional coal power added globally since 2010.

Expected to add 334 GW, or 56 percent of the global total in 2024, China continues to lead the globe in this industry.

According to the survey, it is followed by the US, India, Germany, and Brazil. These five nations will account for 75% of the new solar capacity in 2024.

According to the research, maintaining the sector’s growth required grid capacity and battery storage.

“Providing enough grid capacity and developing battery storage is critical for handling electricity distribution and supporting solar outside of peak sunlight hours as solar becomes more inexpensive and accessible,” the statement stated.

“Solar power might continue to surpass forecasts for the remainder of the decade if these issues are resolved and development is sustained.”

Business

The PSX has resumed operations, achieving a gain of 970 points.

Published

1 day ago

Farwa

The optimistic close at the PSX was propelled by rumors preceding the International Monetary Fund (IMF) executive board meeting on September 25, at which the approval of a $7 billion Extended Fund Facility (EFF) is expected, stated Ahsan Mehanti of Arif Habib Commodities.

Strong economic indicators, such as increasing remittances, escalating exports, and a declining trade deficit, further bolstered investor confidence. Furthermore, the Asian Development Bank’s (ADB) commitment to a $2 billion yearly concessional loan until 2027, along with a robust rupee, significantly contributed to the market’s favorable performance, he stated.

Widespread purchasing at the PSX was noted among blue-chip stocks, with major players like Mari Petroleum (MARI), Engro Fertilizers (EFERT), United Bank Limited (UBL), Meezan Bank Limited (MEBL), and Fauji Fertilizer Company (FFC) recording substantial increases. According to Topline Securities, these stocks collectively resulted in a significant 682-point increase in the index.

Pioneer Cement Limited (PIOC) announced its fiscal year 2024 results, revealing a profits per share (EPS) of Rs 22.79 and a cash dividend of Rs 10 per share. This announcement contributed to the favorable sentiment in the market.

Trading volume surpassed 400.2 million shares, resulting in a total turnover of Rs15.9 billion. Worldcall Telecom Limited (WTL) topped the volume chart, transacting more than 32.2 million shares.

The Large Scale Manufacturing Index (LSMI) demonstrated a year-on-year (YoY) gain of 2.4% in July 2024. This expansion was propelled by multiple critical areas.

Tobacco experienced a significant increase of 90.2%, establishing it as the foremost contributor to the LSMI growth. Conversely, the automotive sector witnessed a substantial increase of 72.0%, indicating robust demand and output.

The transport equipment category experienced an 11.7% increase, signifying robust growth in the manufacturing of transport-related machinery and equipment. The other manufacturing sector experienced a gain of 10.7%, positively impacting the overall LSMI.

Nevertheless, not all industries exhibited strong performance. The leading decliner was the fabricated metal sector, which experienced an 18.4% decrease, signifying a contraction in metal product manufacturing. The electrical equipment industry experienced a substantial decline of 19.4%, indicative of reduced output levels.

In July 2024, the LSMI decreased by 2.1% on a month-on-month (MoM) basis. This fall signifies a minor contraction in manufacturing operations relative to the preceding month, although the favorable year-on-year growth.

Business

As of August 2024, Pakistan’s current account is in surplus.

Published

1 day ago

Farwa

Pakistan’s current account deficit was $161 million as of August 2023, according to figures from the central bank.

The current account deficit for the months of July and August of this year was $171 million, compared to $939 million for the same time in the previous fiscal year.

According to experts, the 40% rise in remittances is the primary cause of the current account surplus.

August saw US$ 2.9 billion in offshore remittances to Pakistan, according to experts.

Comparing July of this year to July of last year, total exports increased by 11.3% YoY to $3.01 billion. In contrast to the $3.08 billion in exports the month before, it decreased by 2.2%.

Compared to the $4.99 billion in imports recorded in July of previous year, total imports increased 12.2% YoY to $5.6 billion. Imports decreased by 1.3% over the previous month.