Pakistan rupee set to come under more pressure

Though government denies it, analysts believe national currency will be further devalued. (AFP)
Updated 27 May 2018
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Pakistan rupee set to come under more pressure

  • Exchange companies are required to maintain record of all buy and sell transactions equivalent to $500
  • Dollar supply declines from $3m per day to only $1m as buyer and seller decline to share identification data

KARACHI: The Pakistan rupee could face further pressure this week, in the midst of the country’s chronic foreign currency shortage and speculation of a third currency devaluation, analysts said.
The currency, which has been exposed to rising external financing requirements and lower remittances, touched 119.05 rupees to the dollar on Friday, closing at 118.70 rupees to the dollar on Saturday in the open market.
“People think that in coming days the rupee would be further under pressure due to increasing demand for the dollar so they start buying anticipating a dollar shortage,” Zeeshan Afzal, executive director-research at Insight Securities, told Arab News.
“Perception and real need (demand) drives the currency exchange market in both ways,” he said.
The rupee has been impacted by Pakistan’s historic high current account deficit of $14 billion that has widened because of increasing imports, insufficient exports and workers’ remittances.
“In Ramadan, the inflow of remittances has declined, demand for dollar from those going for Umrah has increased,” Muzamil Aslam, senior economist and CEO of EFG-Hermes Pakistan told Arab News.
Ratings agency Moody’s Investors Service last week forecast that the rupee could weaken to 125 to the dollar by June of next year.
The country’s central bank has already let the currency decline by 10 percent against the dollar in the past six months via devaluations in December and March.
Demand for dollars usually comes from general public, investors and importers, said Afzal.
“As our imports are more than our exports and other foreign exchange inflows, the pressure on US dollar (reserves) keeps mounting,” he said.

 

Pakistan is also taking steps against money laundering as part of its international commitment to combat terror financing, ahead of a meeting of the Financial Action Task Force meeting in June, when Pakistan will be greylisted.
As part of the measures, State Bank of Pakistan recently directed currency exchange companies to maintain records of identification documents of customers for all foreign currency transactions worth $500 or more, in line with similar thresholds in other international jurisdictions.
“The move of State Bank of Pakistan is aimed at documenting the transactions in order to discourage terror financing,” said Afzal, who added that such requirements had little impact on exchange rates.
But foreign exchange dealers have claimed that lowering the transaction threshold for identification requirements from $2,500 to $500 has negatively impacted business.
“Our daily surplus supply of dollar was around $3 million per day until a week ago, when the central bank’s measures were not enforced,”,Malik Bostan, president of the Forex Association of Pakistan, told Arab News.
“Now the supply is now down to only $1 million per day as currency exchange business has shifted to unregistered dealers.”
“There are around 30,000 unlicensed currency dealers all over Pakistan,” he claimed, adding that the majority of buyers and sellers do not want to share their identification and choose to go to unregistered dealers.
“We have asked the central bank to come up with necessary laws to protect registered currency dealers,” Bostan said. 
“Despite facing adverse business situation we have assured our support to central bank to take whatever steps are needed to get the Pakistan off the grey list of FATF.”
He said that the pressure on the dollar was unusual in the month of Ramadan when dollar inflows typically rise.

FASTFACTS

Pakistan's current account deficit has reached a historic high of about $14 billion.


Urgency needed to boost Palestinian economy: IMF chief

Updated 26 June 2019
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Urgency needed to boost Palestinian economy: IMF chief

  • The MF has been warning of severe deterioration in the Palestinian economy
  • ‘If there is an economic plan, if there is urgency, it’s a question of making sure that the momentum is sustained’

MANAMA: IMF chief Christine Lagarde said Wednesday that major economic growth was possible in the Palestinian territories if all sides showed urgency, as she took part in a US-led conference boycotted by the Palestinian leadership.
The International Monetary Fund has been warning of severe deterioration in the Palestinian economy, with tax revenue blocked in a dispute with Israel which has also imposed a crippling blockade on the Gaza Strip for more than a decade.
“If there is an economic plan, if there is urgency, it’s a question of making sure that the momentum is sustained,” said Lagarde.
The IMF chief is attending a conference in Bahrain to discuss the economic aspects of a United States plan for Israeli-Palestinian peace, which has already been rejected by the Palestinians as it fails to address key political issues.
Lagarde said for the US plan to work “it will require all the goodwill in the world on the part of all parties — private sector, public sector, international organizations and the parties on the ground and their neighbors.”
Citing examples of post-conflict countries, Lagarde said that private investors needed progress in several sectors including strengthening the central bank, better managing public finance and mobilizing domestic revenue.
“If anti-corruption is really one of the imperatives of the authorities — as it was in Rwanda, for instance — then things can really take off,” she said.
The plan presented by White House adviser Jared Kushner calls for $50 billion of investment in the Palestinian territories and its neighbors within a decade.
The proposals for infrastructure, tourism, education and more aim to create one million Palestinian jobs.
Gross domestic product in the Gaza Strip declined by eight percent last year, while there was only minor growth in the West Bank.
Kushner, opening the conference on Tuesday, called the plan the “Opportunity of the Century” — and said the Palestinians needed to accept it before a deal can be reached on political solutions.
The Palestinian Authority has rejected the conference, saying that the US and Israel are trying to dangle money to impose their ideas on a political settlement.
Washington says it will unveil the political aspects of its peace deal at a later date, most likely after Israel’s September election.