After a depreciation of 0.57 per cent, rupee closed at 220.66 per dollar in the interbank market on Friday.
— SBP (@StateBank_Pak) August 26, 2022
Chairperson of the Forex Association of Pakistan Malik Bostan has attributed the rise in dollar’s value to the rising demand of the greenback due to pending oil payments by commercial importers. According to him, the pressure on the local currency will ease once IMF releases the loan tranche under the Extended Fund Facility for Pakistan, which is expected in the next week.
Furthermore, Bostan recommended that the State Bank of Pakistan should increase surveillance on the commercial banks and the trade with Afghanistan should be carried out in Pakistani rupee to keep the demand for dollar in check.
According to other experts, the lifting of the ban on import of luxury items and a decrease in remittances has also contributed to the loss of rupee’s value.
Rupee reached its record low value of Rs239.94 against dollar on July 28. However, after reaching record low, rupee started to recover and gained 26.04 rupees by August 16 after which it was labelled the best performing currency. The rise in the value of rupee was attributed to the ban on import of luxury items imposed by the government to tackle the growing current account and trade deficit. To meet conditions of IMF for the resumption of loan under the EFF, the government had to lift the ban on the imports of luxury items, and lifting of the ban once again resulted in the depreciative trend for rupee. Since August 16 rupee has lost Rs5.78 against US dollar.
In the coming days, rupee is likely to recover its value as the IMF will release the loan tranche. Similarly, the announced investment of 3 billion USD by Qatar will also contribute to the value of rupee against dollar. Moreover, although the ban on import of luxury and non-essential items have been lifted by the government, Finance Minister Miftah Ismail has announced that the government will impose heavy duties on such items as luxury cars to keep their import in check.