Rupee continues to recover against dollar

Pakistani currency hit four-and-a-half-month high at Rs162.86 against the US dollar in the interbank market on Thursday, which came on the back of anticipation about improvement in the inflow of foreign currency in the near future.

The country’s foreign currency reserves, however, have continued to fall for the past three consecutive weeks mainly due to foreign debt repayment, suggesting that the demand for foreign currency has remained high in recent weeks.

Pakistan has paid back some commercial loans to international banks and these banks are set to issue short-term loans again to the country in the coming days and weeks. This will improve the country’s foreign currency reserves.

Sentiment has remained positive about the rupee. “Pakistan is expected to float Eurobond and Sukuk (Shariah-compliant bonds) in the international market in January-February 2021 to raise foreign currency financing,” BMA Capital Executive Director Saad Hashmi said while talking to The Express Tribune.

With a fresh recovery of Re1 in the past two days, the rupee has recovered Rs5.57, or 3.30%, since hitting an all-time low of Rs168.43 on August 26, according to the central bank.

The rupee continued to improve on the back of receipt of healthy workers’ remittances of over $2 billion a month in the past four consecutive months, the Roshan Digital Account (RDA) initiative offering overseas Pakistanis to operate online accounts in Pakistani banks and further extension of six months in foreign debt repayment to G20 member countries, he added.

Earlier, the G20 member states deferred debt repayment by many countries including Pakistan till December 2020 to provide relief during tough times under the coronavirus pandemic. Now, they have rescheduled the debt repayment by an additional six months till June 2021.

Previous estimates made by the government suggested that Pakistan owed $1.8 billion to G20 countries until December 2020. The six-month extension may have increased the size of loans, which will be paid back to G20 members.

Published in The Express Tribune, October 16th, 2020.

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