Rupee depreciation worsened by dollar paucity

Karachi: Importers are expected to open letters of credit (LCs) worth millions for the remainder of the week, causing the Pakistan rupee to depreciate against the dollar on Thursday in interbank trade.

Compared to Wednesday’s closing price of 22.41, the national currency fell 0.12%, or Re0.26, to 222.67 on Thursday.

Rupee also remained weak on the open market, which analysts attributed to a limited dollar supply and a slowdown in dollar sales, which led to a scarcity of the greenback.

According to the owner of a currency exchange company, slow inflows of remittances from foreign workers also weighed.

“Additionally, political turbulence and a stalemate in negotiations between the International Monetary Fund (IMF) and Pakistan for the conclusion of the ninth review of the loan facility have dampened morale,” he added.

Wednesday, the State Bank of Pakistan (SBP) promised the Standing Committee on Finance of the National Assembly that action would be taken against the banks allegedly involved in the opening of Letters of Credit.

“The SBP met with the banks and advised them against their behavior, urging them to rationalize the spreads charged to clients,” SBP officials told the committee.

In addition, Pakistan’s overall debt and obligations rose by Rs12 trillion, or 23.7%, to Rs62.46 trillion in the first quarter of this fiscal year. Analysts attributed this increase to a delay in the IMF loan disbursement and the devaluation of the rupee.

As of November 11, 2022, the State Bank of Pakistan’s (SBP) foreign exchange reserves increased by $3 million to $7.96 billion.

According to information issued by the central bank on Thursday, the country’s total liquid foreign reserves were $13.8 billion. Commercial banks held a total of $5.84 billion in foreign currency reserves.