KARACHI: For the past two weeks, the Pak-Rupee has been continuously improving its position against the US dollar and has appreciated Rs 2 in interbank while Rs 1.9 in open market. An analyst at AKD brokerage house explained why the USD has depreciated. He told thecorrespondent.pk, “the dollar has gone down internationally in last few months as rising US debt has started creating trouble for its own economy because of COVID-19 and slow economy.”
According to State Bank of Pakistan (SBP), the rupee was being traded at Rs. 158.10 against the dollar in the interbank market, compared with the closing of Nov. 1 at Rs. 160.10, meanwhile it closed at Rs. 157.90 compared with Rs 159.80 closing rate of November 1, 2020 in the open currency market.
Malik Bostan, President of Forex Association, said, “Pakistan’s economy is heading towards prosperity as there is no pressure on local currency.” He further claimed that the money exchange companies and forex dealers are looking at the USD being exchanged at Rs 155 by the end of this calendar year, and Rs. 150 by the end of this fiscal year.
Factors for the appreciation of the PKR include the surplus of current accounts, 20-25% improvement in remittances, and the county’s exports rising. Earlier, the central bank had the pressure of Hot Money which was dragging the local currency down, Mr. Bostan told thecorrespondent.pk.
Furthermore, Mr. Bostan said that the initiative of the central bank for launching ‘Roshan Digital Account’ has started supporting the country’s reserves and non-resident Pakistanis are opening their Roshan Digital Accounts in Pakistan. The State Bank Pakistan’s (SBP) aim is to assist by using the global network to invest in Pakistan, he added.
The government also launched ‘Naya Pakistan Certificates’, which will initially bring $1 billion into country, while the government is expected to issue Naya Pakistan Certificates worth $1.5 billion later this year.
An economist at a brokerage house, who spoke on the condition of anonymity, doubts that the Roshan Digital Impact will have a major impact. He said, “Pakistan cannot boost its reserves through Roshan Digital Accounts since no one with big money will open an account, only small investors or individuals are opening accounts with $500, $1000 under this scheme.”
The impact of such a decline in the USD and currencies globally is being felt in Pakistan, he claimed.
“The Pakistani people living abroad may have this great opportunity to invest in such schemes and can earn profits on their money which they don’t have this facility in Europe and America owing to the low markup or discount rates”, said a dealer of NBP Exchange Company.
According to the scheme, Pakistanis living abroad, as well as resident Pakistanis who have declared their foreign assets to the Federal Board of Revenue (FBR), are eligible to buy the certificates. The certificates, issued by the SBP, will give up to a 7% return in US Dollars and 11% in PKR.
The money changers, however, said that people living abroad are slightly frightened but that they have started investing into these schemes and the central bank has received a decent amount in Roshan Digital Accounts. This low outflow increased liquidity in the banking system, helping the local currency to improve its value. PKR’s appreciation has forced those holding their savings in dollars to sell the USD in the open market.
When aunching the Naya Pakistan Certificate, Prime Minister Imran Khan said that the SBP has offered some very good incentives to overseas Pakistanis. He stated, “we have to take such initiatives forward. The Naya Pakistan Certificate is important because it will convince overseas Pakistanis to bring foreign currencies to Pakistan.”
The Prime Minister claimed in his speech that once people start bringing their dollars to Pakistan, they will not only benefit from the scheme themselves but it would also help Pakistan stabilize its economy.
Earlier, the SBP let the rupee depreciate massively in the interbank market after finalization of an agreement with the International Monetary Fund (IMF) for a loan programme on May 12, 2019. The IMF has asked Pakistan to end state control of the rupee and let the currency move freely to find its equilibrium against the USD and other major world currencies.
Additionally, the World Bank, which finances some of the infrastructure and social safety net projects in Pakistan, has supported the idea of leaving the rupee free from state control in a bid to give a much-needed boost to exports and fix a faltering economy.
SBP Governor, Dr Reza Baqir, has claimed on different occasions that the central bank played a key role in facilitating higher remittances and its free market mechanism which has greatly helped in stabilizing the exchange rate. This is the first time the rupee has moved in both directions, rising as well as falling, which he says is evidence that the exchange rate is now market determined.
The SBP takes credit for the stabilization of exchange rate. The remittances into the country increased by over 26 per cent in the first four months of the current fiscal year while the outflow from the country was much lower than the average outflow of last year.