Rupee Could Recover On Optimistic Updates of Inflows from Friendly Nations

  • The rupee will likely remain range-bound in the upcoming week.
  • Analysts expect trading to continue near current levels unless news about Saudi Arabia’s assistance emerges.
  • The nation’s foreign reserves plunged to the lowest in almost four years.

The coming week will likely see the rupee trading range-bound as the dollar sees matching supply and demand. Nevertheless, optimistic updates of inflows from friendly nations can see the currency gaining some ground.

The rupee closed the outgoing week at around 223.91 against the dollar. Meanwhile, it closed near 224.40 per greenback on Friday, confirming a 0.21% drop. A currency dealer stated that he expects the trading to remain at current levels, with minor fluctuations, unless positive news about Saudi Arabia’s assistance emerges.

Meanwhile, the nation’s foreign reserves have slumped to the lowest mark in about four years, with only sufficient to satisfy one-month imports. SBP (Stated Bank of Pakistan)-held foreign reserves fell to $784M from $6.7B by 2 December. Remember, sharp reserve reduction means a nation struggles to accomplish external monetary needs.

The dealer added that the market might not respond too severely to the massively low exchange reserves. That’s because the central bank amplified allay worries about the potential of the nation’s default. That could help ease speculation and uncertainty within the marketplace.

Jameel Ahmad, SBP Governor, recently stated that Pakistan would ensure timely loan payments. Meanwhile, he expected inflows to increase substantially in the current financial year’s second half. The State Bank of Pakistan had re-paid two loans amounting to $1.2 billion.

Ahmad stated that the banks would likely refinance a similar tally in the upcoming days. That would help to raise the nation’s foreign reserves.

He added that the government was in communication with a friendly nation for a $3 billion loan disbursement & negotiations with several multilateral agencies were progressing, ensuring further fiscal support.

Ahmad claimed that Pakistan’s debt profile comprises multilateral and bilateral creditors and only a minor portion owed to international banks, and SBP boasts sufficient reserves to re-pay all obligations.

Meanwhile, the financial year 2023 should have $33B re-paid to external shareholders, including the CAD (Current Account Deficit) of $10B and loan re-payments of $23B. SBP’s governor stated that Pakistan had re-paid over $6B of the $23B payable external debt.

Besides that, the country has cooperated with relevant countries to roll over a $4B bilateral loan. Also, negotiations about another $8.3B maturing obligations rollovers are underway. The remaining pending re-payments stand near $4.7B for this fiscal year’s reminder.

That includes $1.1B in commercial loans (payable to foreign banks) and multilateral loans worth $3.6B. Pakistan received $4B in foreign exchange inflows (excluding $ 4B rollovers). Economists stated that the interbank market stayed range bound amid actions within the open market. The kerb market experienced a dollar shortage.

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