Business

Rupee likely to stay range-bound in coming days

Published

2 years ago

Farwa

The local currency fell by 49 paisas last week.
Market to monitor developments on stalled IMF programme: experts
SBP’s reserves fell to their lowest since April 2014 this month

KARACHI: The rupee is expected to move in a range-bound mode in the coming days, and the currency market to decide its path with influxes as the country’s foreign reserves have plunged to a critical level, analysts told The News.

During the outgoing week, the local currency fell by 49 paisas in the interbank market. It closed at 224.94 per dollar on Monday, while Friday’s rupee closing rate was 225.43.

An analyst said, “The rupee is forecast to trade range-bound over the next week, but investors appear to be more concerned about a rapid decline in foreign exchange reserves.”

He added that the market would also keep an eye on how quickly the government acts to meet the conditions of the stalled International Monetary Fund (IMF) programme to know about the rupee’s future route. The real effective exchange rate (REER) declined to 98.8 in November from 100.2 in the previous month.

The foreign exchange reserves held by the State Bank of Pakistan (SBP) plunged $584 million to $6.1 billion as of December 16, putting immense stress on the balance of payments.

The SBP’s reserves fell to their lowest since April 2014. The central bank’s reserves currently cover only five weeks’ worth of imports. The SBP attributed the decline in reserves to the repayment of foreign loans.

Global rating agency S&P Global cut Pakistan’s long-term sovereign credit rating by one notch to “CCC+” from “B”, citing external risk.

The IMF’s ninth review has been pending since September.

It has raised apprehensions about the fiscal slippages stemming from the devastating floods and revenue shortfall, mainly from the petroleum development levy. Additionally, there have been problems with the budgeted flood rehabilitation expenditure’s exactness.

However, analysts expect the IMF bailout package to resume in the first quarter of 2023.

Several revenues and fiscal consolidation measures, including the imposition of general sales tax (GST) on petroleum products and the removal of GST immunities, gas tariff growths, rationalisation of electricity tariffs, etc., are likely to be taken by the government.

The steps may help get the programme back on track and open the door for releasing the next tranche of $1.2 billion in February 2023.

According to media reports, the IMF has made it clear to Pakistani officials that Islamabad must work toward fulfilling all requests within the next 15 to 20 days to restart the Fund programme that has been halted.

The tighter currency controls in Pakistan, which have resulted in the development of a black market for dollars and the determent of foreign inflows through legal channels, have prompted the IMF to urge Pakistan to allow its currency to gain its true value.

There are chances of a further increase in interest rates in the upcoming monetary policy.

“In our view, an interest rate hike is a better option than devaluing the currency, as doing the latter immediately gives wings to inflation (fuel, imported inflation, etc.). Also, a hike may help in giving some strength to the local currency,” said Tresmark in a weekly note.

An uptick in interest rates would also comfort the IMF, who by now probably believes that the government only wants to please their vote bank rather than save the country, and also using the flood tragedy to gate crash the IMF ecosystem.

Business

The IMF assessment mission is scheduled to land in Pakistan on March 3.

Published

22 minutes ago

Farwa

According to sources, the economic review and negotiations will go on until March 15.

The second $1 billion tranche will be released after the nine-member team, headed by Nathan Porter, evaluates Pakistan’s economic performance throughout the course of their two-week visit.

The IMF mission will also present its recommendations for the next financial year’s budget, sources said. “Any relief to the salaried class can only be offered after the lender agreed over it,” according to sources.

The IMF mission will hold talks with the ministries of finance and energy, planning ministry and the State Bank of Pakistan. The IMF delegation will also hold discussions with the FBR, OGRA, NEPRA and other state institutions and ministries.

Separate discussions with the governments of Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan will also be held by the IMF delegation.

Tax reforms such as the agriculture sector’s income tax, the advancement of privatization, fiscal policies, and energy sector reforms will be the main topics of debate. In addition, the IMF will examine inflation, interest rates, exchange rate management, and monetary policy.

Today, an IMF mission will discuss climate assistance with the governments of Punjab and Balochistan.

Business

The amount of trade between Saudi Arabia and Pakistan hits $700 million.

Published

1 day ago

Farwa

Through the Special Investment Facilitation Council (SIFC), Pakistan’s trade connections with Saudi Arabia have grown significantly, with bilateral trade volume rising from $546 million to $700 million and exports to the Kingdom growing by 22%.

As bilateral economic cooperation continues to grow, Saudi investors have shown a strong interest in Pakistan’s construction, energy, agricultural, and information technology sectors. The objective for exporting IT services between the two countries has been raised from $50 million to $100 million.

Saudi Arabia has set up a help desk dedicated to making it easier for Pakistani IT companies to register in the Kingdom in order to expedite commercial procedures. The goal of this program is to speed up economic collaborations between the two countries and lower administrative barriers.

The well-known Saudi restaurant chain AlBaik has revealed plans to open locations in Pakistan, which is a big step for the food service industry and should lead to the creation of new job possibilities in the area.

Officials have noted that stronger business links between the two countries lead to greater economic stability, and the SIFC has played a crucial role in promoting these trade advancements. For bilateral trade and investment projects, the Council remains a crucial facilitator.

According to a trade official with knowledge of the developments, “the establishment of dedicated support mechanisms, such as the help desk for IT companies, demonstrates a commitment to long-term economic partnership,” The goal of these programs is to improve the conditions for commercial collaboration between the two nations.

The increasing amount of trade and the diversity of investment sectors show that Saudi Arabia and Pakistan’s economic ties are changing as both countries seek to deepen their business alliances in a number of industries.

Business

After more than 50 years, Bangladesh and Pakistan resume direct trade.

Published

1 day ago

Farwa

After more than 50 years, the two governments will resume direct bilateral trade, with Bangladesh’s food ministry announcing Sunday that it will receive a supply of 25,000 tonnes of rice from Pakistan next month.

After former Prime Minister Sheikh Hasina was overthrown last August, relations between Bangladesh and Pakistan have begun to improve after decades of tense relations.

Since then, there have been increased bilateral interactions between Bangladesh and Pakistan. Nobel laureate Muhammad Yunus, the interim government’s senior adviser, has met twice with Pakistani Prime Minister Shehbaz Sharif.

According to the food ministry, Dhaka completed an agreement earlier this month to import grains from Pakistan.

“On March 3, the first shipment of 25,000 tonnes will reach Bangladesh,” Zia Uddin Ahmed, a ministry assistant secretary, told Arab News.

“This is the first time that Bangladesh has started importing rice from Pakistan at the government-to-government level since 1971.”

Following direct maritime contact between the two South Asian countries in November—a Pakistani cargo ship stopped in Bangladesh for the first time since 1971 with imports and exports arranged by private companies—their trade relations grew.

Resuming trade with Pakistan is a significant step for Bangladesh, according to Amena Mohsin, a lecturer at North South University and a specialist in international relations.

“We want to see progress in our bilateral relationship with Pakistan. Most significantly, we are currently going through a low point dispute with India, even though we constantly diversify our partnerships.

This most recent move to purchase rice from Pakistan is really significant in this context,” she told Arab News.