Dollar rising despite remittance inflows

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KARACHI: The abrupt surge in the demand for dollars and concerns over the State Bank of Pakistan’s limit to provide liquidity to the forex market drove the exchange rate at 101.10 in the interbank market on Thursday, currency experts said.


“The International Monetary Fund (IMF), on the occasion of announcing a loan programme of $5.3 billion, indicated that the rupee overvalued by 5 to 10 percent, thereby, it has to be depreciated,” said Muzzamil Aslam, an economist and managing director at Emerging Economics Research.


“This assessment by the IMF officials is leading to the speculation and volatility in the currency market,” he added.


He expressed concern over the non-seriousness of the government and the regulator of the exchange rate, saying that the government and the central bank have not countered the IMF statement and both are silent spectator on this issue yet.


“In fact, decline in the rupee value is one of the major actions set by the IMF for the approval of the IMF bailout package,” Aslam added.


The SBP takes concrete measures to bring stability in the forex market. The inflows of workers’ remittances usually gains upward momentum in the holy month of Ramazan. Pakistani expatriates remit funds to their families and relatives to meet the Ramazan and Eid expenses and for offering of Umrah.


This increases the flow of dollars supply in the market, helping the exchange rate to stabilise against the dollar.


However, Overseas Pakistani workers may not have been able to capitalise on weak rupee, which falls freely against the dollar in the currency market. The inflows of dollars seem insufficient to bring stability in the forex market, he said.


The government’s controversial decision to allow the Federal Board of Revenue (FBR) direct access to the banking transactions of the accountholders to detect tax evasion is also another reason for further dollarisation of the economy, Aslam said.


A currency dealer said that owing to get high spreads, hoarding of the dollars has been started at the individual level.


However, a banker said that exchange companies are making money as the currency dealers themselves were involved in hoarding of the currency to gain value.


The dollar soared to new peaks against the rupee both in the interbank and open market on account of high demand for the greenback and the low availability pushed up the price of the dollars in the currency market.


The rupee reached the level of 103 against the dollar in the open market on Thursday.


The rupee depreciated by 1.47 percent in the official market since the beginning of this fiscal year. The rupee lost its value by 5.13 percent in FY13.

Courtesy:  The News

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