KARACHI: With expectations for new inflows from the International Monetary Fund (IMF), the rupee has been strengthening against the US dollar over the past three months. On Tuesday, it was trading close to Rs277 in the interbank market.
However, financial analysts warned that the government’s plan to introduce $300 million in Panda bonds to the Chinese market could be derailed by a spike in terrorist attacks within the nation and the deaths of five Chinese engineers connected to the Dasu hydroelectric project.
The dollar’s value versus the rupee dropped five paise to close at Rs278.08, a five-month low, according to the State Bank of Pakistan (SBP).
Exporters have been obliged to sell their dollar proceeds due to the ongoing depreciation, as they become increasingly concerned that the exchange rate may decline even more in the days ahead.
Bisham attack could endanger the Panda bond proposal, according to experts.
Experts in currency markets stated that the government’s actions discouraging imports were the reason for the low demand, which prevented an excess of dollars from entering the banking system.
According to a top banker, “market sentiment for a stable exchange rate has been supported by hopes for further dollar inflows.”
Experts in the financial sector predicted that the rupee may strengthen even more after the government and the IMF finalized a Staff-Level Agreement early in the next month for the $1.1 billion last payment of the $3 billion Stand-by Arrangement.
A financial expert, who wished to remain anonymous, did, however, voice disappointment over the suicide attack on Chinese workers on the Dasu dam.
He stated that the $300 million Panda bond issue must be postponed for the time being. “Difficult to assess so quickly about the repercussions of the killing of five Chinese citizens, but I would say that it would further downgrade the economic relations with China,” he added.
On Friday, Finance Minister Muhammad Aurangzeb declared that the government was eager to introduce Panda bonds this year in order to raise money from the Chinese market.
According to financial experts, it also hinges on China’s response to the deaths of its residents in Pakistan. It might also have an impact on the prime minister’s anticipated trip to China in the upcoming days.
The Chinese have already restricted investments in Pakistan. During the first eight months of the current fiscal year, the foreign direct investment from China fell to just $80.4 million compared to $472m in the same period last year. The new government is planning to improve the economic ties and attract Chinese investment under the new phase of CPEC.
