Business

Rupee expected to trade at 216 against dollar in next 10 days

Published

2 years ago

Farwa

Analysts predict multilateral creditor’s assistance will strengthen rupee.
Rupee expected to trade at 216 to the dollar in next 10 days.
Analysts see interest rates in US topping 5%.

KARACHI: Rupee is likely to appreciate against the US dollar in the coming week, depending on the expected inflows from the Asian Development Bank (ADB) and Pakistan’s removal from the Financial Action Task Force’s (FATF) grey list, The News reported.

The local currency dropped against the dollar by 0.89% this week in the interbank market. However, in the final trading session on Thursday, the rupee drove up to 220.84 due to positive news from the ADB and FATF. It closed at 218.89 on Monday.

Multilateral creditors’ assistance in the wake of the floods would help increase foreign exchange reserves and strengthen the local currency, the analysts believe.

As of October 14, the forex reserves held by the State Bank of Pakistan stood at $7.59 billion — enough to cover about one month of imports.

The rupee is expected to trade at 216 to the dollar in the next 10 days and 210 to the dollar in the following 30 days, according to Tresmark, a terminal that monitors live prices of financial markets.

“This is because of ADB-related inflows of $1.5 billion in the coming week and $2 billion of inflows in the first week of November. Of course, this would not have been possible without the finance minister’s undervalued rupee mantra,” Tresmark said in a client note.

But the real test for the rupee would be six months from now, it added.

Analysts see interest rates in the US topping 5% (last seen in 2008) and a relentless surge of the dollar.

While major currencies unanimously have a bearish bias, markets are forecasting the Indian Rupee to be at 95 per dollar, the Bangladesh Taka to be at 115 per dollar, and the Yuan to keep weakening. Dollar strength is one factor, but the global recession remains a much bigger concern.

“While CAD (current account deficit) for September was almost at breakeven, economists are looking at a 15-20% drop in exports, plus a 5% drop in remittances,” it said.

According to them, import compression and slowing down the economy further would be an ongoing requirement to sustain the economic winter, it added.

The rupee weakened during the outgoing week marginally on the back of the settlement of smaller letters of credit. Market estimates that about 50% (or around $600 million) still remains to be processed.

“The interbank market is also completely out of dollar liquidity, as can be seen in multi-month lows in swap premiums. Premiums for 1, 3, and 6 months are -2 (down from 130), 25 (down from 390), and 175 (down from 750) respectively,” it said.

In a positive development, the FATAF on Friday removed Pakistan from its list of countries that are under “increased monitoring” known as the “grey list”. This would help boost the nation’s reputation and get a credit rating upgrade from the global rating agencies.

Since the International Monetary Fund (IMF) included the implementation of FATF action plans as a structural benchmark, the removal would make it possible for Pakistan to successfully complete the next review of the IMF’s Extended Fund Facility.

However, the global rating agency Fitch cut Pakistan’s sovereign credit rating by a notch to ‘CCC+’ from ‘B-’, citing further deterioration in the country’s external liquidity and funding conditions and a decline in foreign exchange reserves.

The decrease comes three months after Fitch downgraded the country’s outlook from “stable” to “negative” and revised the ranking to B-. Fitch typically does not assign outlooks to sovereigns with a rating of ‘CCC+’ or below.

Business

Gold prices in Pakistan approach an all-time high.

Published

19 hours ago

Farwa

Following a substantial surge the prior day, gold prices in Pakistan are ascending to unprecedented levels with an additional gain on Thursday, coinciding with a rise in global precious metal rates.

The price of 24-karat gold in the local market rose by Rs700 per tola, reaching Rs277,900, as reported by the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA).

Likewise, the cost of 10 grams of 24-karat gold increased by Rs600, currently priced at Rs238,254.

Globally, gold prices exhibited an upward trend, increasing by $7 throughout the day. The APGJSA reports that the international gold price was $2,682 per ounce.

Notwithstanding the increase in gold prices, the silver market exhibited stability, with the price of silver maintained at Rs3,050 per tola.

In the previous month, gold prices in Pakistan reached an unprecedented high of Rs 277,000 a tola, driven by substantial gains in the worldwide market.

Business

World Bank: Power industry subsidies soar by 400% in just five years.

Published

20 hours ago

Farwa

Ninety-four percent of domestic customers will benefit from the budgetary subsidy in 2024, according to a World Bank report, which credits the increase in protected consumers with contributing to the weight of subsidies.

In the current fiscal year, the electricity sector subsidy has increased by an astounding Rs. 954 billion, from Rs. 236 billion in the 2020 fiscal year to Rs. 1190 billion.

Notwithstanding changes, the circular debt has averaged Rs. 400 billion yearly over the last four years due to the incapacity to minimize losses and inadequate recovery of electricity payments.

According to the World Bank, the government must solve the fundamental problems in the power industry in order to lower the burden of subsidies and circular debt, as rising electricity prices and inadequate tax collection will only serve to worsen the circular debt crisis.

The rise in Pakistan’s power sector circular debt has raised worries from the World Bank (WB) despite an unprecedented increase in energy pricing.

Within the last six years, the debt has grown by 1241 billion rupees, according to the World Bank’s study. Between 2019 and 2021, the debt climbed by 1128 billion rupees.

The electricity sector’s circular debt has been increasing at an alarming rate, according to a World Bank analysis. Between 2022 and 2024, there was a substantial increase of 113 billion rupees.

Pakistan’s electricity industry has 2393 billion rupees in total circular debt as of 2024.

Restructuring is required to solve the circular debt issue, according to the World Bank.

Business

Final settlement: Govt to pay five IPPs Rs 72 billion.

Published

20 hours ago

Farwa

On October 10, Prime Minister (PM) Shehbaz Sharif declared that the agreements with five IPPS would be terminated in the first phase. Sources claim that the government will give Rs 15.5 billion to Rousch Power and Rs 36.5 billion to Hubco.

In a same vein, the federal government would pay Lalpir Power Rs 12.8 billion, Atlas Power Rs 15.5 billion, and Sapphire Power Rs 6 billion.

The sources state that late payment fees are not included in the settlement. With effect from October 1, the agreements with the five IPPs will be considered officially ended.

PM Shehbaz earlier remarked that the termination was carried out with the owners of the IPPs’ mutual permission while presiding over the federal cabinet meeting in Islamabad.

The Prime Minister notified the Cabinet that the only money that will be paid, interest-free, to these IPPs is the outstanding balance.

According to him, the national exchequer will gain over 411 billion rupees from the termination of these contracts, while power customers will save roughly sixty billion rupees.

According to Prime Minister Shehbaz Sharif, it was the result of the arduous teamwork of the entire government. In this regard, he also acknowledged the contributions and assistance of the associated parties. He specifically mentioned General Asim Munir, the Chief of Army Staff, who showed a personal interest in the situation.

The prime minister characterized the development as the start of a trip that will ultimately lead to the advancement and prosperity of the populace.

PM Shehbaz Sharif also brought up the assistance that the Punjabi and Federal governments gave to power users over the summer.