Rupee expected to stay stable amid robust remittances

KARACHI: The rupee is expected to remain stable against the dollar in the near term, supported by healthy supplies due to a persistent rise in remittances, dealers said.

On Monday, the rupee finished at 277.78 to the dollar in the interbank market. It dropped to 277.94 on Thursday. On Friday, though, the local unit recovered its losses and closed at 277.73.

“Because of the increases in remittances and foreign exchange reserves, we anticipate that the rupee will remain stable in the near term,” a currency dealer said.

Remittances to Pakistan surged by 23.9 per cent year-on-year to $3.1 billion in October. These inflows rose to $11.8 billion in the first four months of the current fiscal year, up 34.7 per cent from the same period last year.

State Bank of Pakistan Governor Jameel Ahmad said on Friday that forex reserves are expected to reach $12 billion by the end of this month.

Ahmad’s statement come as a team from the International Monetary Fund (IMF) is scheduled to visit Pakistan next week to assess the country’s progress on its $7 billion bailout package.

The improvement in foreign exchange reserves is attributed to a reduction in the current account deficit amid robust workers’ remittances, increased exports, and the receipt of the first tranche from the IMF’s Extended Fund Facility (EFF) programme. As of November 1, the SBP's reserves stood at $11.17 billion -- enough to cover more than two months of imports. The SBP’s persistent dollar sales from the market also supported the reserves. The SBP purchased $1.3 billion from the interbank forex market in June and July to bolster reserves and repay external debt. Ahmad also noted that exports are on the rise, and foreign direct investment (FDI) is showing some improvement. Inflows through the Roshan Digital Account amounted to $200 million in October. He said that Pakistan has fulfilled all requirements of the Asian Development Bank (ADB) and is anticipated to receive $500 million in loans soon.

Tresmark’s weekly note indicated that remittances may help the country exit the current account deficit. This could strengthen or at least stabilise the rupee for the remainder of the year.

“Swaps are expected to trend higher as banks do sell-buy swaps to generate rupee liquidity and invest at higher rates,” it said.