Hinting that the rupee can devalue even further, State Bank of Pakistan (SBP) says that it supports the devaluation of Pakistani rupee because it is a market driven adjustment. This Friday, the rupee lost its value against dollar by Rs 1.50.
On Friday, State Bank issued a statement where the Pakistani Rupee and US Dollar exchange rate in the interbank market was closed at Rs. 107 per US dollar. The market is currently open and the exchange rate is fluctuating between Rs 110 and Rs 109.5.
In the view of SBP this is a market-driven adjustment in the exchange rate which means it will show an imbalance in the external account and sustain higher growth trajectory.
The statement read that the exchange rate will continue to reflect the demand and supply conditions. SBP stands ready to intervene, in case speculative and momentary pressures emerge to maintain control of the foreign exchange markets.
Highlighting the country’s external financial condition, the statement adds that exports recorded a double-digit growth during Jul-Oct FY18 on the external front. Foreign Direct Investment reached a nine-year high; and workers’ remittances posted a modest growth.
However, the continuation of high growth in imports led to the expansion of the current account deficit, which in turn will deplete the country’s foreign exchange reserves.
SBP emphasized the macroeconomic condition of the country saying that Pakistan’s economy is well positioned in order to achieve the GDP growth target of 6% in fiscal year 2017-18.
This 8.4% growth in Large Scale Manufacturing along with the encouraging assessment of major crops during the first quarter of the year proves the favourable economic position, while different services are likely to benefit from the positive spillovers of the growing commodity sector.
The bank statement further read,
Strong growth in private sector credit, particularly in fixed investment loans, also reflects the dynamism in the real economic activity. Moreover, inflation continues to remain low and stable, and stood at 3.6 percent during the first five months of the year.