The Pakistani rupee maintained its winning streak as the local unit edged up by Rs1.21 against the US dollar in the interbank trading on Friday. According to money dealers, the rupee continued its upward momentum as the value of the US dollar declined by Rs1.21 and it was changing hands at Rs296.75 in the interbank. On Thursday, the local currency scored a handsome gain against the greenback as it appreciated by 86 paisas, ending the day at Rs297.96. The local unit is on the surge for the eighth consecutive day today. Its revival could be attributed to a relentless crackdown on currency smugglers and hoarders, and recent reforms introduced by the State Bank of Pakistan.

Talking to a foreign media, Malik Bostan, chairman of the Exchange Companies Association of Pakistan (ECAP), said "The army chief took notice, and the restoration of (dollar) supply in the open market is credited to him." "A task force was made that is now cracking down on the illegal market," he added. It has been learned that the exporters had been selling dollars on a large scale out of fear of further devaluation. They are now increasingly converting their US dollar holdings into local currency through various official banking channels, thereby contributing to the rising demand for the Pakistani rupee.

Meanwhile, the market reacted positively to a surprise move by the State Bank of Pakistan which on Thursday maintained the benchmark policy rate unchanged at 22%, contrary to the traders’ expectations of a rise in the interest rate. In another development, Pakistan’s Current Account Deficit (CAD) fell to $160 million in August 2023 compared to a deficit of $775 million in July 2023 and thus improved by $615 million, according to data released by the State Bank of Pakistan (SBP) on Thursday.

The CAD narrowed to $935 million in the months of July and August 2023, compared to $2.035 billion during the same period in the previous fiscal year. This significant improvement in the CAD can be attributed to a notable decline in the country’s import bill. Meanwhile, Foreign Direct Investment (FDI) in Pakistan stood at $146.1 million in August 2023, registering a notable increase of 66.61% MoM and 15.44% YoY compared to $87.7m in July 2023 and $126.6m in August 2022, the latest data issued by the SBP showed.

However, the country’s central bank reported a decrease of $140 million in its official foreign exchange reserves for the week ending September 8, 2023. The foreign exchange reserves held by the SBP fell to $7.64 billion, down from $7.78 billion recorded a week earlier on September 1, 2023. The central bank attributed this decline in foreign exchange reserves to external debt repayments.

 
Credit: Independent News Pakistan (INP)