KARACHI: The rupee / dollar parity is likely to face further pressure on the current account deficit to balloon next week.
The local currency had already hit an all-time low during the outgoing week. The value of the rupee could deteriorate further due to the growing demand for external payments.
During the outgoing week, the rupee fell to an all-time low of 169.12 rupees against the dollar on the interbank forex market. Experts believed that the State Bank of Pakistan (SBP) intervened in the market to support the rupee. This resulted in the exchange rate closing at Rs 168.19 against the greenback to end the week on September 17, 2021.
However, the support might not be enough in the coming days, as the current account deficit for the first two months has widened considerably.
According to balance of payments data released by the central bank, the current account deficit swelled to $ 2.29 billion between July and August of the current fiscal year, from a current account surplus of $ 838 million. .
The current account deficit widened more sharply in August 2021 to $ 1.476 billion, compared to a deficit of $ 814 million in July 2021 and a surplus of $ 255 million in August 2020.
The Pakistan Bureau of Statistics (PBS) revised the trade balance data. According to revised data, the trade deficit for the months of July to August 2021 widened to $ 7.58 billion, or 122%, from the previous deficit of $ 7.49 billion, or 120%.
In the initial trade balance report, the import bill stood at $ 12.06 billion in the first two months of the current fiscal year, but revised figures showed it had risen further to $ 12.168 billion. dollars during the months under review.
The increase in import payments can be attributed to the acceleration of economic activities; following ease in coronavirus cases. The government has eased restrictions and trade and business are returning to normal.
The country urgently needs to increase foreign exchange reserves to fuel the external payment.
On the input side, exports rose 28 percent to $ 4.587 billion in the first two months of the current fiscal year, from $ 3.584 billion for the corresponding months of the previous fiscal year.
In addition, workers’ remittances also grew 10% to $ 5.36 billion between July and August 2021, up from $ 4.86 billion in the same months last year. .
However, these inflows are not sufficient to meet the demand for external payments.
Stability in rupees will also depend on the security situation in neighboring Afghanistan. It is reported that the foreign exchange reserves of the Afghan central bank have been blocked after political uncertainty in the country. The payments crisis in Afghanistan is also having an impact on the currency markets in Pakistan.