There is a massive influx of US Dollars at Pakistani banks as exporters are offloading their dollar proceeds amid fears of further decline in the value of the top global currency.
This influx of US dollars is putting a massive amount of pressure on the local exchange rate. Currency dealers suggest the current situation may cause a further decline in the dollar’s value so exporters are converting their earnings to avoid losses, reported Dawn.
The US$ has depreciated by Rs. 3 against the PKR in the interbank market in the past three months. Meanwhile, forward premiums have gone down by over 50 percent due to low confidence in the dollar. As a result, the government is now taking measures to stabilize the dollar/PKR rate and support exporters.
Importers, anticipating future costs, are getting dollars at adjusted premiums for managing their import needs for up to six months. However, banks are only providing dollars to importers if they have sufficient funds in their accounts, per central bank regulations.
Although the State Bank of Pakistan (SBP) has expanded the list of essential imports, importers aren’t happy with these restrictions.
On a positive note, the SBP reported an increase in forex reserves by $19 million to reach $8.04 billion, attributing the improvement to purchasing dollars from the interbank market.
Looking ahead, the SBP anticipates receiving about $1.1 billion this month as the final tranche of an ongoing short-term loan agreement with the International Monetary Fund. This inflow will help offset an outflow of $1 billion in an upcoming payment of a dollar-denominated Eurobond, expected by mid-April.
SBP must purchase dollars from market to strengthen it’s reserves and stabilize dollar/ rupee rate. Strategy must be developed to reduce foreign borrowings as it will reduce the borrowing cost that is killing us.
This is not possible without boosting exports. Increasing exports is not possible in short term that requires long term strategy. At this moment we must export human labor to reduce un- employment and improve inflow of dollars.