Rupee plummets to more than 83 to a dollar

[Naveed Yaseen]

By Saad Hasan
KARACHI: Rupee depreciated beyond Rs83 against a dollar on Tuesday as dealers rushed to buy greenback in anticipation of a rise in its demand in the open market, analysts said.

Pakistani currency lost 6 paisa to close at Rs83.2 from previous day’s Rs82.6 as August 1 draws near when the State Bank of Pakistan (SBP) stops providing foreign exchange for import of petroleum products. Oil import bill consumes most of the country’s foreign exchange. According to the SBP, total import bill was $2.9 billion. Petroleum products and crude cost $800 million. From August, the SBP will only pay for crude oil imports. Analysts point out that rupee depreciation means that rising foreign exchange reserves of the SBP are not helping to boost perception of economic stability.

Last year, rupee depreciated steeply when the country’s foreign exchange reserves fell to less than half of current level of over $11.8 billion. That proved devastating for many companies dependent on revenues in dollars and imports. National airline, oil refineries and petroleum marketing companies were battered as rupee cost of imports surged out of control. Experts are questioning the rationale for letting rupee depreciate. The SBP has refused to interfere by taking on the burden of oil payments again. “The central bank fears that it won’t be able to meet annual foreign debt obligations if continued to pay for oil imports,” a former banker said.

“But it is not looking at the repercussions.” Pakistan’s key textile exports depend on imported raw material like synthetic fiber and artificial silk yarn besides plant equipment, which is imported on regular basis. “It is always better to built foreign exchange reserves through increase in exports,” he said, adding that depreciation of rupee would never help exporters in the long run. Till a few days back, rupee was trading at under Rs81.50.

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