KARACHI: Due to exporters selling their earnings quickly in anticipation of further US currency devaluation, banks are facing a dollar glut.
Some banks are regarded as export banks in the currency market because of their extensive network of exporters, who sell their profits to these banks. Currency dealers claim that there has been a notable surge in export revenue inflow, which is driving up the value of the currency.
“Exporters would have suffered if the current circumstances had caused the dollar to drop even further,” Atif Ahmed, a currency dealer in the interbank market, stated.
The rupee has steadily appreciated versus the dollar over the last three months; on Thursday, it finished at Rs277.93. During this time, the value of the dollar in the interbank market has dropped by about Rs 3.
SBP reserves rise to $8.04 billion for the fourth week.
In addition, the forward premium, or future currency exchange rate, has decreased by more than 50% over the past six months, from a peak of Rs24 per dollar during the fiscal year to Rs14 now.
Similarly, the three-month forward-booking premium has dropped to Rs8 per dollar, indicating a decline in investor confidence in the US currency. In an effort to assist exporters, the government is currently taking action to stop additional dollar depreciation.
Dealers in the banking industry have noticed that importers are managing their import requirements by obtaining dollars at these modified premiums for three, four, and six months in advance of future expenditures.
The banks are disbursing dollars to importers only when they have funds in their accounts, in accordance with State Bank policy. Due to import restrictions, trade has decreased and current account deficits have increased. Certain imports, both essential and non-essential, are nevertheless subject to restrictions for importers.
Despite the SBP’s expansion of the list of necessary imports, importers claimed that the limitations have had a major negative impact on economic expansion. Pakistan’s final goods, both domestically produced and exportable, rely heavily on raw material imports.
The nation’s consumption was lowered by low imports and high inflation, which led to negative growth in the previous fiscal year and a meager 1% growth rate in the second quarter of this year. According to World Bank predictions, this fiscal year’s GDP growth will only be 1.8 percent.
SBP set aside $19 million
On Thursday, the SBP announced that the reserves had risen to $8.04 billion, a $19 million increase. The currency market thinks that the SBP’s reserves improved because dollars were bought from the interbank market. This is standard procedure for the SBP.
The nation’s overall foreign exchange reserves, which included $5.34 billion from commercial banks during the week that concluded on March 29, now total $13.38 billion.
Additionally, the central bank anticipates receiving the last installment of the existing short-term loan deal with the IMF this month, totaling around $1.2 billion.
The inflow will assist the State Bank in covering the $1 billion outflow that is required to cover the maturing Eurobond payment. The bonds should mature by the middle of April.
Because of Ramadan, the banking industry also anticipates increased remittance inflows, which will aid the State Bank in managing its foreign exchange reserves and exchange rate.
