No respite for dollar as rupee opens week on positive note
- Pakistani rupee appreciates for 12th consecutive session.
- Local currency gains Rs1.95 against dollar.
- SBP likely to maintain status quo in interest rate today.
KARACHI: The Pakistani rupee continued its rally against the US dollar for the 12th consecutive session at the start of the week’s trading on Monday.
The local currency appreciated by Rs1.95, 0.89%, against the greenback and closed at 217.97 in the interbank market.
Last week, the rupee ended the week at 219.92 per dollar. It continued to appreciate against the greenback despite a decline in the foreign exchange reserves and Moody’s downgrading of the nation’s sovereign credit rating.
Meanwhile, traders and analysts believe that the local unit is unlikely to fall from its current levels against the US dollar.
Moreover, the State Bank of Pakistan (SBP) is scheduled to meet today to assess developments on the economic front and announce its monetary policy for the next seven weeks.
Conflicting movements in economic indicators suggest the worst is not yet over, but the market has developed a consensus that the policy rate will remain unchanged at 15% for the next one and a half months.
Gold rally in Pakistan as rupee extends losses
Gold prices climbed on Friday on the back of a sliding rupee, as markets remained focused on the State Bank of Pakistan’s (SBP) interest rate strategy.
According to the data released by All-Pakistan Sarafa Gems and Jewellers Association (APSGJA), the price of gold (24 carats) rose by Rs700 per tola and Rs601 per 10 grams to settle at Rs208,700 and Rs178,927.
Exchange loss likely to deprive masses benefit in petrol price cut
- Govt to announce petrol price today for next fortnight.
- Exchange loss adjustment to rob consumers of petrol price cut.
- Current exchange rate is heavily tilted in favour of the dollar.
KARACHI: Due to a sharp rise in the value of the dollar in the last two weeks, the masses may not get any benefit in the prices of petroleum products, according to a The News report.
The report said that the price of diesel is reflecting an Rs34/litre decrease for the next fortnight. The government is scheduled to review the price of petroleum products today.
The international price of crude oil has come down, which can be translated into a major cut in domestic prices of petroleum products, but only if the government passes on the full impact to the end consumers.
However, sources in the oil sector believe that the government would not pass on the full impact of the reduction in the international prices on exchange losses accumulated over the months, which had put the oil sector in a financial crunch.
The government may be deterred to pass on the impact to end consumers, as the oil sector would be in deep financial trouble if their losses are not adjusted on account of sharp exchange rate fluctuations in the past many months.
Oil sector sources told the publication that the ex-refinery price of diesel is showing Rs34/litre decrease for the next fortnight. However, the exchange losses on diesel go over Rs100/litre, which needs to be adjusted.
Sources said that the government may pass on some relief by cutting the diesel price by Rs15 to 20 per litre for the consumers while adjusting the remaining exchange losses.
Sources, however, felt that this was a ripe time for the government to adjust whatever remained of exchange loss adjustment.
The fall in crude prices gave the government enough fiscal space to accommodate the oil companies, which have been facing financial problems as they were not receiving the full amount of exchange losses.
As far as petrol is concerned, its price is showing Rs13-14 per litre decline on the basis of its ex-refinery price in the next fortnight.
Again the exchange loss adjustment may deprive the consumers of the benefit of price reduction and the government may only pass on Rs4-5 relief while adjusting the remaining amount.
The present exchange rate is heavily tilted in the favour of the dollar. It is a huge hurdle for the government, in terms of reducing the prices of petroleum products in the domestic market.
According to the oil industry estimates, the average exchange rate calculated for the next fortnight is Rs283 to determine the price of the ex-refinery.
Pakistan’s oil sector has repeatedly requested the government in many letters to resolve the exchange losses issue, with few players in the industry pleading to make it more fair and transparent.
Petrol relief package gives IMF ‘excuse’ to delay agreement
- IMF verifying from KSA, UAE on financing before staff-level deal.
- Fund rejects initial petrol subsidy plan.
- Asks Pakistan to provide more details about fuel relief package.
ISLAMABAD: The International Monetary Fund (IMF) has asked the Pakistani authorities to provide more details about the petrol relief package causing more delay in the signing of the staff-level agreement, The News reported Thursday.
The half-baked cross-fuel subsidy proposal by the petroleum ministry has failed to convince the Fund, which has rejected the initial plan arguing that more details are required to verify its sustainability.
The question arises, according to the publication, as to why the PM Office and Ministry of Petroleum announced the plan without taking the IMF review mission into confidence prior to its announcement.
The report stated that the Ministry of Finance has distanced itself from the plan proposed at a time when Pakistan and the lender are inching towards signing the agreement.
The Ministry of Petroleum has now been advised to withdraw the proposal at this stage and iron out the policy details with the Ministry of Finance and then take the IMF into confidence in the next review.
Meanwhile, Minister of State for Finance Dr Aisha Ghaus Pasha has termed the petrol subsidy plan ‘not workable’.
Speaking to journalists after attending the Senate Standing Committee on Finance meeting, Aisha Ghaus Pasha said there is no suggestion of subsidy on petroleum products and the Petroleum Division had suggested cross-subsidies on petroleum products, which is not workable.
She said that the parleys with the IMF were continuing and now the only outstanding issue remained of the lender getting confirmation on external financing from bilateral countries, including Saudi Arabia and the UAE, which was underway.
“There are indications that financial assistance is expected from bilateral friends very soon, that will help finalise the staff-level agreement with the IMF,” she said.
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