ISLAMABAD: Pakistan’s Ministry of Finance said on Saturday that it was focused on strengthening the exchange rate regime after the rupee hit an all-time low of 140.36 against the US dollar on Friday in interbank trade, mainly pushed by the excessive buying of the Saudi Riyal for the upcoming Hajj season.
Malik Bostan, President Pakistan Forex Association, told Arab News that individuals who intended to go to Saudi Arabia for Umrah and Hajj in the coming months were excessively buying the Saudi Riyal due to “rumors of further depreciation of the Pakistani rupee.”
“We used to have five to seven million Riyals in surplus per day in market that were exported to the international market to import dollars,” he said. “However, now the Saudi Riyal is not in surplus due to its increasing demand in local market, and this gap has led to a shortage of US dollars.”
Bostan urged the government to maintain the exchange rate in the interbank market to “quell rumors of further devaluation of the Pakistani rupee in the coming days.”
The country’s currency exchange rate market remains highly volatile due to speculations of further depreciation of the local currency before Islamabad signs a bailout deal with the International Monetary Fund (IMF) next month.
The rupee on Friday plunged to 140.50 against the US dollar at one point, but it closed at 140.36. The dollar gained one rupee in the interbank and 1.30 rupees in the open market during the week.
The Finance Ministry’s spokesman, Dr. Khaqan Hassan Najeeb, has denied any link between the exchange rate fluctuations and Pakistan’s ongoing negotiations with the IMF.
“The discussions with international partners do not entail any specific target of the exchange rate,” he said in a statement on Saturday.
“The government’s focus is on further strengthening the exchange rate regime, aligning it and keeping it consistent with the evolving macroeconomic fundamentals of the economy,” he added.
On March 15 this year, Pakistan received inflow of $1 bn from UAE as placement of funds. After taking into account outflows relating to external debt and other official payments, the total foreign exchange reserves held by central bank of the country increased by $716 million during the week to $8.8 billion while reserves held by the commercial banks stood at $6.9 billion, increasing the total reserves held by the country to $15.709 billion by the end of the last week.
China is also expected to release $2.1 billion in commercial loan by Monday, an injection that will further push up foreign currency reserves and help stabilize the exchange rate.
