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Rupee depreciates on low dollar inflows for second consecutive month

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11 months ago

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  • Country’s ability to generate dollar loans shrank to normal: official.
  • Loans disbursement remained low in last 2 months.
  • Pakistan secured $3.52bn in July-September period.

The local currency has started depreciating against the US dollar as Pakistan received low dollar inflows in the shape of loans during the consecutive second month of September 2023, The News reported on Thursday.

In the first month, July 2023, Pakistan received $2.89 billion as reported by the Economic Affairs Division (EAD) but, if a disbursed loan of $1.1 billion by the IMF under the $3 billion Standby Arrangement (SBA) is included, the total disbursement touches the $4 billion mark.

“The country’s ability to generate dollar loans have shrunk to normal in the last two months, August and September, in which the disbursement of loans remained at $316 million and $320 million respectively,” sources confirmed to The News on Wednesday.

The military establishment, in consultation with intelligence agencies and law-enforcement agencies, launched a crackdown on moneychangers and speculators and the rupee-dollar parity improved substantially, but there was a limit to taking such administrative measures.

The economic managers failed to complement these administrative steps to ensure dollar inflows and after witnessing shrinking inflows, the administrative measures lost charm. So the rupee is depreciating against the US dollar again.

The dollar inflows in July 2023 witnessed a massive boost when after securing $1.1 billion from the IMF under the $3 billion SBA programme, Pakistan also obtained $2 billion in additional deposits from the Kingdom of Saudi Arabia. The government also secured guaranteed loans of $508.34 million for induction of fighter aircraft.

So far in the first quarter, July-September period, Pakistan secured $3.52 billion from all multilateral and bilateral creditors in the current fiscal year against $2.234 billion in the same period of the last financial year. The EAD had included disbursement of $1.16 billion from the IMF as part of its disbursement showed in July 2022, but the amount released by the IMF in July 2023 was not made part of the EAD-released foreign loans.

The multilateral creditors disbursed $490.48 million during the first quarter of the current fiscal year as the ADB provided $61.7 million and Asian Infrastructure Investment Bank (AIIB) $22.96 million. The EU and European Investment Bank (EIB) have not disbursed any amount so far in the current fiscal year.

The World Bank’s IDA lending stands at $240.93 million in the first quarter of the current fiscal year, while IBRD funding is hovering around $58.45 million in the same period of the current fiscal year. The Islamic Development Bank (IsDB) has so far disbursed $100 million for short-term goals in the current fiscal year.

Total disbursement from bilateral creditors stood at $324.05 million during the first quarter, July-September period of the current fiscal year, out of which the Kingdom of Saudi Arabia clinched the top position by making disbursement of $300 million loan in the shape of an oil facility on deferred payment.

China has disbursed just $0.39 million in the first quarter, $1.28 million by France, $0.77 million by Germany, $2.82 million by Japan, $4.85 million by Korea and $13.98 million by USA.

Through the Naya Pakistan Certificate, Pakistan has received $204.5 million in the first quarter of the current fiscal year. Pakistan also received a $2bn deposit from the KSA in the first three months of the current fiscal year. The government has so far remained unable to get any single penny through commercial loans despite making a projection of $4.5 billion and the same applies in the case of generating dollars through international bonds.

The government has sought $17.6 billion in the shape of foreign loans for the whole financial year. 

Now Islamabad would have to secure $14.1 billion in the remaining three quarters (Oct to June) to materialise the desired target to keep the foreign exchange reserves at comfortable levels. Otherwise, the balance-of-payment crisis might erupt anytime in case of derailment of the IMF programme.

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It is anticipated that 150 ships would arrive at Gwadar by the year 2045, allowing the port to handle fifty percent of all imports.

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3 days ago

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In an effort to strengthen the port’s economic importance, the Federal Government has made the decision to direct fifty percent of all imports from the public sector to Gwadar Port.

By taking this action, which has the backing of the Special Investment Facilitation Council, the port’s financial situation is going to be improved.

The Cabinet will be presented with a summary of imports through Gwadar by the Ministry of Maritime Affairs, which will take place after Prime Minister Shehbaz Sharif’s recent trip to China.

When the next Cabinet Meeting takes place, Ahsan Iqbal, the Federal Minister for Planning, Development, and Special Initiatives, will examine the Chinese offer for the Karachi to Hyderabad Section of the ML-1 Project and bring it to the Cabinet.

Company preparations for the Shanghai International Import Expo, which will take place in November 2024, are being made by the Board of Investment and the Ministry of Commerce of Pakistan.

One of the most important aspects of the China-Pakistan Economic Corridor is the Gwadar port, which serves as a significant commerce route connecting China, the Middle East, Africa, and Europe. At this time, the Gwadar Port is able to accommodate two huge ships, and by the year 2045, it is anticipated that it would be able to handle up to 150 ships.

By developing the Gwadar Port, regional connectivity would be improved, employment will be created, and international investment will be attracted.

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The price of gold in Pakistan has experienced a significant surge.

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3 days ago

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Gold prices in Pakistan surged significantly on Thursday following two consecutive days of decline, with the price per tola rising by Rs2,000 to reach Rs262,100. This increase was in accordance with the downward trend in international market values.

The All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) reported that the price of 10 grams of 24-karat gold rose by Rs1,714, reaching Rs224,708.

Conversely, the world gold market experienced an upward trajectory. According to the APGJSA, the global price of gold surged to $2,503 per ounce following a $22 gain during the trading session.

The local market experienced a significant decline in silver prices, decreasing from Rs50 to Rs2,900 per tola after a prolonged period.

The local market’s gold prices remain subject to the ever-changing dynamics of the international market, as well as domestic considerations such as currency exchange rates and domestic demand.

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Business

The government has not met the deadline set by the International Monetary Fund (IMF) for the approval of a $7 billion loan.

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4 days ago

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On Tuesday night, there were virtual talks between representatives of the Finance Ministry and the IMF delegation, with the main topics being external finance and income generation.

According to people familiar with the situation, no date has been set for the IMF’s Executive Board to approve the loan despite the ongoing negotiations.

Officials from the Finance Ministry informed the IMF mission about the government’s initiatives to get outside funding during the discussions. Updates on loan rollovers and fresh finance commitments from allies were included in this. According to sources, the IMF has received a schedule, and loan rollovers are expected to be finished by the end of next week.

The $12 billion in debt must be rolled over before the loan can be approved by the Executive Board, according to the IMF mission.

In the virtual discussions, representatives of the Federal Board of Revenue (FBR) conversed with the IMF team over the revenue deficit. The FBR must reach its revenue goals for this month, according to the IMF mission. As a result, the IMF has asked the FBR to submit a thorough strategy outlining how it will close the gap left by the shortfall and guarantee that revenue goals are reached.

Apart from the conversations on outside funding, there are rumors that the Finance Ministry is actively holding talks with commercial banks in order to obtain new funding. According to reports, negotiations are taking place with four distinct sources for commercial loans, which are anticipated to support the government’s overall financial plan.

Finance Minister Muhammad Aurangzeb disclosed on Tuesday that the IMF was in favor of introducing targeted subsidies. He said that qualifying recipients might receive these subsidies through the Benazir Income Support Programme (BISP).

In order to guarantee consistency, the minister announced that this week’s talks with chief ministers will focus on implementing a similar policy across the country. He was having a casual conversation in parliament with the journalists.

In response to queries about outside funding, Aurangzeb revealed a $2 billion deficit and said that talks to close this gap are progressing. He stressed how crucial it is to obtain business loans.

He went on, “At this point, there’s a need to secure an agreement for commercial loans, not exactly their issuance,” emphasizing that debt rollover negotiations are nearing their conclusion and doing well. The minister expected that these developments would shortly be reported to the governments of allied countries by relevant authorities.

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