KARACHI: The Pakistan rupee lost ground against the US dollar Monday ahead of the monetary policy announcement — scheduled for today — and the speculations surrounding the International Monetary Fund (IMF).
In the interbank market, the rupee fell 2.01 or 0.93% against the dollar to close at 216.66, down from Friday’s close of 214.65, according to data from the State Bank of Pakistan (SBP).
The greenback traded at 213-214 during the outgoing week. It closed at 213.98 per dollar on Monday and finished at 214.65 on Friday. The rupee fell 0.31% against the greenback last week.
Economist and former adviser to the federal ministry of finance Dr Khaqan Hassan Najeeb said the local unit slipped by Rs2 against the dollar due to political developments and the strengthening of the dollar internationally.
“But we also know the economic situation remains challenging. SBP reserves are weak at $7.8 billion — hardly enough for over a month of imports,” he said.
Non-oil imports are curbed by SBP by rationing the opening of letter of credit (LC), the economist said, adding that oil is already in excess, so oil imports are low.
“Point being, we are operating in a restricted environment, and there would be import needs piling up.”
Getting flows including IMF money, multilateral and bilateral monies, and new foreign direct investment (FDI) is essential to normalise the balance of payments.
“Of-course exports drop and remittance slowdown in July must be looked at carefully.”
Talking to The News, a trader said that apart from forex inflows and outflows, the monetary policy decision will be instrumental to gauge the rupee’s future direction.
Another factor that weakened the rupee was a shortage of greenback in the open market, which moved up the rate of the interbank price of the dollar as well.
The government lifted a ban on the import of non-essential and luxury goods to meet a condition of the IMF ahead of the board’s meeting later this month to revive the loan programme.
However, it announced the imposition of heavy duties on completely built units cars, mobile phones, and electronic appliances to discourage imports.
The market will also evaluate the impact of opening up luxury imports on the rupee, according to traders.
The foreign currency reserves have started to recover. The foreign reserves held by the central bank slightly increased by $67 million or 0.9% to $7.9 billion as of August 12.
In the international exchange market, the US dollar has continued to weaken in relation to the Pakistani rupee.
The dollar fell to Rs278.10 from Rs278.17 at the beginning of interbank trading, according to currency dealers, a seven paisa loss.
In the meantime, there was a lot of turbulence in the stock market, but it recovered and moved into the positive zone. The KSE-100 index recovered momentum and reached 116,000 points after soaring 1,300 points.
Both currency and stock market swings, according to analysts, are a reflection of ongoing market adjustments and economic uncertainty.
The cornerstone of economic cooperation between the two brothers and all-weather friends is still the China-Pakistan Economic Corridor, the initiative’s flagship project.
In contrast to reports of a slowdown, recent events indicate a renewed vigour and strategic emphasis on pushing the second phase of CPEC, known as CPEC Phase-2, according to the Ministry of Planning, Development, and Special Initiatives.
According to the statement, this crucial stage seeks to reshape the foundation of bilateral ties via increased cooperation, cutting-edge technology transfer, and revolutionary socioeconomic initiatives.
Planning Minister Ahsan Iqbal is leading Pakistan’s participation in a number of high-profile gatherings in China, such as the 3rd Forum on China-Indian Ocean Region Development Cooperation in Kunming and the High-Level Seminar on CPEC-2 in Beijing.
His involvement demonstrates Pakistan’s commitment to reviving CPEC, resolving outstanding concerns, and developing a strong phase-2 roadmap that considers both countries’ long-term prosperity.
At the core of these interactions is China’s steadfast determination to turn CPEC into a strategic alliance that promotes development, progress, and connectivity.
Instead of being marginalised, CPEC is developing into a multifaceted framework with five main thematic corridors: the Opening-Up/Regional Connectivity Corridor, the Innovation Corridor, the Green Corridor, the Growth Corridor, and the Livelihood-Enhancing Corridor.
With the help of projects like these, the two countries will fortify their partnership, and CPEC phase-2 will become a model of global economic integration and collaboration that benefits not just China and Pakistan but the entire region.
On December 2, core inflation as determined by the Consumer Price Index (CPI) significantly slowed, falling to 4.9% in November 2024 from 7.2 percent in October 2024.
The CPI-based inflation rate for the same month last year (November 2023) was 29.2%, according to PBS data.
Compared to a 1.2% gain in the prior month, it increased by 0.5% month over month in November 2024.