As the IMF’s USD 3 billion contingency facility began its first review on Thursday, both the Pakistani rupee (PKR) trended lower against the US dollar, casting doubt on prospects, Dawn reported on Thursday.
The dollar has been appreciating over the past eight sessions, but Wednesday’s PKR 1.18 rise dented the confidence of both importers and exporters.
Some currency experts have accused banks of deliberately manipulating exchange rates to profit from higher dollar rates. However, Atif Ahmed, an interbank currency trader, defended the banks, attributing the rising dollar price to shrinking supply and rising demand.
“This is a false allegation. It’s a supply and demand issue. Supply is shrinking while demand is growing, pushing the dollar price down,” he said.
The State Bank of Pakistan (SBP) reported the dollar closing at PKR 282.65 from PKR 281.47 a day earlier, representing a depreciation of 0.42%.
Exporters stopped selling their dollar holdings, leading to higher rates, Dawn said, citing sources.
“The higher bids have changed market sentiment, which needs to be stopped to check the depreciation of the rupee,” said Zafar Paracha, secretary general of the Association of Stock Exchange Companies of Pakistan.
Pointing out that the supply of dollars decreased in October due to limited export growth, Paracha stressed the importance of maintaining the positive sentiment achieved after the September crackdown on illegal currency trading.
In the open market, the dollar also gained 50 paise to close at PKR 283.50. But exchange firms said they were continuing to sell dollars to banks. A senior banker noted that the interbank market not only serves importers but also caters to the SBP’s demand for dollars to facilitate debt repayment, Dawn reported.
The central bank’s efforts to maintain foreign exchange reserves around the $8 billion mark ahead of talks with the IMF continued.
Finance Minister Shamshad Akhtar has expressed confidence in successful negotiations to release the second tranche of USD 710 million from the IMF, citing improved economic performance in the first quarter of the current fiscal year as the basis for this optimism.
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