Business

Rupee seen falling to 325 against dollar in 2024: analysts

Published

12 months ago

Farwa

Local currency under pressure over last seven years.
Rupee has seen a 20% fall against the dollar this year.
As per REER index, it remains undervalued.

KARACHI: As Pakistan grapples with high external debt repayments, dwindling foreign exchange reserves and expected monetary easing, the rupee is expected to extend losses against the dollar in 2024, The News reported citing analysts.

Over the last seven years, the rupee has remained under pressure, which is why its woes, as per the analysts, are far from over.

The local currency has seen a 20% fall against the dollar this year, which is higher than that recorded in the last five year’s average fall of 13% a year and the 10-year average of 8%, Topline Securities, a brokerage company, said in a note.

External financing gaps, challenging global financial markets, and local political instability have severely impacted foreign exchange reserves and built pressure on the rupee.

As per the real effective exchange rate (REER) index, rupee is undervalued. The latest November’s REER index published by the State Bank of Pakistan stands at 98.18 versus the last 10-year average of 106.6.

Considering Pakistan’s external payment risk and other factors, Topline expects the currency to fall to 310 against the dollar by June 2024 in the interbank market. It also sees the rupee dropping to 325 by the end of next year. The rupee closed at 282.20 to the dollar on Wednesday, compared with its previous closing value of 282.37.

Pakistan has been grappling with record-high inflation as a result of rising energy prices to meet the reform targets mandated by the IMF’s lending programme. From July through November of FY2024, the average rate of inflation is 28.6%. Inflation is expected to decline, supporting the case for interest rate cuts in 2024.

As significant debt obligations approach early in the coming year and the run-up to the elections, another analyst projects that the rupee could weaken to 295-296 versus the dollar in 2024. The rupee may weaken further due to expected monetary easing.

Pakistan’s external funding needs are estimated at $28.7 billion for the current fiscal year, including $24.6 billion for debt repayments and $4 billion for the financing of the current account deficit. Out of this, $5.48 billion has been repaid already and $9.3 billion has been agreed to be rolled over, according to analysts.

This result in a funding gap of $14 billion is expected to be filled by foreign investments ($1.5 billion), the International Monetary Fund’s disbursements under its loan programme ($3 billion), and loans from other multilateral creditors ($4.5 billion). After this, the shortfall in the country’s gross external financing requirements and available funding is $5 billion. However, the country’s official reserves have fallen to around $7 billion as of December 15.

When the caretaker government took charge in August 2023, the rupee came further under pressure amid speculation that the non-political caretaker setup might allow the currency to fall. As a result, the rupee fell by 6% (from 288 to 307) in the interbank market, while it plummeted by 10% (from 296 to 328) against the US dollar in the open market from August 14, 2023 to September 04, 2023.

The rally in US currency after August was mainly driven by open and black markets where the premium (open market vs interbank rate) increased from 1-2% to 8-9%.

The caretaker government, along with the State Bank of Pakistan (SBP), took several measures to cool down the demand in the open market. The measures included (1) tightening security along the border to prevent currency smuggling, (2) closure of exchange companies involved in illegal activities, and (3) an increase in the minimum capital requirement from Rs200 million to Rs500 million for exchange companies.

As a result of these measures, the rupee has gained strength in the interbank market, appreciating by 9% from 307 to 282 against the dollar. Meanwhile, in the open market, it has increased by 16%, moving from 328 on September 04, 2023, to 284 as of December 27, 2023.

Business

With its second-largest surge ever, PSX approaches 114,000 points.

Published

1 day ago

Farwa

Driven by renewed activity from both private and government financial institutions, the Pakistan Stock Exchange (PSX) saw its second-largest rally in history on Monday.

The market regained many important levels in a single trading session as it rose with previously unheard-of momentum.

Intraday trading saw a top increase of 4,676 points, and the PSX’s benchmark KSE-100 Index gained 4,411 points to settle at 113,924 points. This impressive rebound demonstrated significant investor confidence by reestablishing the 100,000, 111,000, 112,000, and 113,000-point levels.

The market also saw the 114,000-point limit reestablished during the trading session.

The positive tendency was reflected when the market’s heavyweight shares touched its upper circuits. Among the most busiest trading sessions in recent memory, an astounding 85.78 billion shares worth a total of Rs55 billion were exchanged.

Experts credited the spike to heightened institutional investor activity and hope for macroeconomic recovery. Considered a major market recovery, the rally demonstrated the market’s tenacity and development potential.

Business

In interbank trade, the Pakistani rupee beats the US dollar.

Published

1 week ago

Farwa

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.

Business

Phase II of CPEC: China-Pakistan Partnership Enters a New Era

Published

1 week ago

Farwa

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.