The Pakistani rupee remained stable against the US dollar in the interbank market on Friday despite low foreign exchange reserves. According to the information received from the forex traders, the local currency appreciated by nominal 17 paisas against the greenback and was currently being traded at Rs294.75. On Thursday, the Pakistan rupee’s fall against the US dollar halted after four consecutive losses. At close, the rupee had settled at 294.92, an increase of one paisa. Also on Thursday, the State Bank of Pakistan’s (SBP) foreign exchange reserves slightly increased by $12 million to $8.055 billion during the week ended on August 11 against the previous trend of frequent declines since the first week of July. The SBP reserves were $4.524 billion on July 7, which jumped to $8.727bn after inflows from the IMF, Saudi Arabia and UAE.

However, the forex holdings of the central bank saw an outflow of $686 million in less than a month despite tight control over imports. This fall in reserves was followed by a massive rupee depreciation of 6.7 percent or Rs18.5 against the US dollar during the July 4 to Aug 16 period. The SBP reserves are equally important for both the imports and debt servicing while it also grossly affects the exchange rate. Financial market experts believe the economic fundamental would further weaken as an interim government cannot take long-term policy decisions. They said caretaker Finance Minister Dr Shamshad Akhtar is a good choice but there is little hope from the minister to put back the economy on the right track short time. The central bank reported that the country’s total reserves stood at $13.379bn including $5.323bn of commercial banks in the week ended on Aug 11.

Credit: Independent News Pakistan (INP)