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Rupee depreciates on low dollar inflows for second consecutive month

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1 year ago

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  • Country’s ability to generate dollar loans shrank to normal: official.
  • Loans disbursement remained low in last 2 months.
  • Pakistan secured $3.52bn in July-September period.

The local currency has started depreciating against the US dollar as Pakistan received low dollar inflows in the shape of loans during the consecutive second month of September 2023, The News reported on Thursday.

In the first month, July 2023, Pakistan received $2.89 billion as reported by the Economic Affairs Division (EAD) but, if a disbursed loan of $1.1 billion by the IMF under the $3 billion Standby Arrangement (SBA) is included, the total disbursement touches the $4 billion mark.

“The country’s ability to generate dollar loans have shrunk to normal in the last two months, August and September, in which the disbursement of loans remained at $316 million and $320 million respectively,” sources confirmed to The News on Wednesday.

The military establishment, in consultation with intelligence agencies and law-enforcement agencies, launched a crackdown on moneychangers and speculators and the rupee-dollar parity improved substantially, but there was a limit to taking such administrative measures.

The economic managers failed to complement these administrative steps to ensure dollar inflows and after witnessing shrinking inflows, the administrative measures lost charm. So the rupee is depreciating against the US dollar again.

The dollar inflows in July 2023 witnessed a massive boost when after securing $1.1 billion from the IMF under the $3 billion SBA programme, Pakistan also obtained $2 billion in additional deposits from the Kingdom of Saudi Arabia. The government also secured guaranteed loans of $508.34 million for induction of fighter aircraft.

So far in the first quarter, July-September period, Pakistan secured $3.52 billion from all multilateral and bilateral creditors in the current fiscal year against $2.234 billion in the same period of the last financial year. The EAD had included disbursement of $1.16 billion from the IMF as part of its disbursement showed in July 2022, but the amount released by the IMF in July 2023 was not made part of the EAD-released foreign loans.

The multilateral creditors disbursed $490.48 million during the first quarter of the current fiscal year as the ADB provided $61.7 million and Asian Infrastructure Investment Bank (AIIB) $22.96 million. The EU and European Investment Bank (EIB) have not disbursed any amount so far in the current fiscal year.

The World Bank’s IDA lending stands at $240.93 million in the first quarter of the current fiscal year, while IBRD funding is hovering around $58.45 million in the same period of the current fiscal year. The Islamic Development Bank (IsDB) has so far disbursed $100 million for short-term goals in the current fiscal year.

Total disbursement from bilateral creditors stood at $324.05 million during the first quarter, July-September period of the current fiscal year, out of which the Kingdom of Saudi Arabia clinched the top position by making disbursement of $300 million loan in the shape of an oil facility on deferred payment.

China has disbursed just $0.39 million in the first quarter, $1.28 million by France, $0.77 million by Germany, $2.82 million by Japan, $4.85 million by Korea and $13.98 million by USA.

Through the Naya Pakistan Certificate, Pakistan has received $204.5 million in the first quarter of the current fiscal year. Pakistan also received a $2bn deposit from the KSA in the first three months of the current fiscal year. The government has so far remained unable to get any single penny through commercial loans despite making a projection of $4.5 billion and the same applies in the case of generating dollars through international bonds.

The government has sought $17.6 billion in the shape of foreign loans for the whole financial year. 

Now Islamabad would have to secure $14.1 billion in the remaining three quarters (Oct to June) to materialise the desired target to keep the foreign exchange reserves at comfortable levels. Otherwise, the balance-of-payment crisis might erupt anytime in case of derailment of the IMF programme.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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2 days ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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3 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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