KARACHI: The Pakistani rupee on Tuesday further appreciated against the U.S. dollar by 20 paisa and three paisa in the open and interbank markets, respectively.
The local currency traded at Rs154.70 in the open market, and Rs154.93 in the interbank market, according to updates available with the media.
Pakistan’s foreign exchange reserves have risen to nine-month high of $17.29 billion as the State Bank of Pakistan (SBP) received $1.3 billion from the Asian Development Bank (ADB).
The central bank’s reserves have expanded to $10.41 billion, whereas the reserves of commercial banks are $6.88 billion. In the current financial year, foreign exchange reserves have increased by $3.10 billion.
Financial experts are of the view that despite the country’s foreign exchange have swelled, but that still does not meet the standards of the International Monetary Fund (IMF), which considers that the reserves of any country should be equal to imports for at least three months.
The local currency has strengthened to hit a five-month high against the greenback fall owing to decline in imports, higher flow of foreign funds and positive macroeconomic news from the South Asian country.
Increase in dollar from lending agencies and foreign investment in rupee also helped stabilise the rupee-dollar parity.
Currency dealers foresee rupee to rise further in coming months in the wake of higher inflows of dollars and increased attraction of local currency.
Importantly, Moody’s Investors Service (“Moody’s”) has affirmed Pakistan’s local and foreign currency long-term issuer and senior unsecured debt ratings at B3 and changed the outlook to stable from negative.
According to a report issued by the bond credit rating business of Moody’s Corporation, “the change in outlook to stable is driven by Moody’s expectations that the balance of payments dynamics will continue to improve, supported by policy adjustments and currency flexibility.”
Moody’s expects Pakistan’s current account deficit (CAD) to continue narrowing in the current and next fiscal year (ending June of each year), averaging around 2.2% of GDP, from more than 6% in fiscal 2018 (the year ending June 2018) and around 5% in fiscal 2019.
Moody’s expects policy enhancements, including strengthened central bank independence and the commitment to currency flexibility, to support the reduction in external vulnerability risks.
The IMF programme, which commenced in July 2019, targets higher foreign exchange reserve levels and has unlocked significant external funding from multilateral partners including the Asian Development Bank and the World Bank.
Nevertheless, unless the government can effectively mobilise private sector resources, foreign exchange reserves are unlikely to increase substantially from current levels.
