Business

Rupee likely to stay range-bound in coming days

Published

1 year ago

Farwa

The local currency fell by 49 paisas last week.
Market to monitor developments on stalled IMF programme: experts
SBP’s reserves fell to their lowest since April 2014 this month

KARACHI: The rupee is expected to move in a range-bound mode in the coming days, and the currency market to decide its path with influxes as the country’s foreign reserves have plunged to a critical level, analysts told The News.

During the outgoing week, the local currency fell by 49 paisas in the interbank market. It closed at 224.94 per dollar on Monday, while Friday’s rupee closing rate was 225.43.

An analyst said, “The rupee is forecast to trade range-bound over the next week, but investors appear to be more concerned about a rapid decline in foreign exchange reserves.”

He added that the market would also keep an eye on how quickly the government acts to meet the conditions of the stalled International Monetary Fund (IMF) programme to know about the rupee’s future route. The real effective exchange rate (REER) declined to 98.8 in November from 100.2 in the previous month.

The foreign exchange reserves held by the State Bank of Pakistan (SBP) plunged $584 million to $6.1 billion as of December 16, putting immense stress on the balance of payments.

The SBP’s reserves fell to their lowest since April 2014. The central bank’s reserves currently cover only five weeks’ worth of imports. The SBP attributed the decline in reserves to the repayment of foreign loans.

Global rating agency S&P Global cut Pakistan’s long-term sovereign credit rating by one notch to “CCC+” from “B”, citing external risk.

The IMF’s ninth review has been pending since September.

It has raised apprehensions about the fiscal slippages stemming from the devastating floods and revenue shortfall, mainly from the petroleum development levy. Additionally, there have been problems with the budgeted flood rehabilitation expenditure’s exactness.

However, analysts expect the IMF bailout package to resume in the first quarter of 2023.

Several revenues and fiscal consolidation measures, including the imposition of general sales tax (GST) on petroleum products and the removal of GST immunities, gas tariff growths, rationalisation of electricity tariffs, etc., are likely to be taken by the government.

The steps may help get the programme back on track and open the door for releasing the next tranche of $1.2 billion in February 2023.

According to media reports, the IMF has made it clear to Pakistani officials that Islamabad must work toward fulfilling all requests within the next 15 to 20 days to restart the Fund programme that has been halted.

The tighter currency controls in Pakistan, which have resulted in the development of a black market for dollars and the determent of foreign inflows through legal channels, have prompted the IMF to urge Pakistan to allow its currency to gain its true value.

There are chances of a further increase in interest rates in the upcoming monetary policy.

“In our view, an interest rate hike is a better option than devaluing the currency, as doing the latter immediately gives wings to inflation (fuel, imported inflation, etc.). Also, a hike may help in giving some strength to the local currency,” said Tresmark in a weekly note.

An uptick in interest rates would also comfort the IMF, who by now probably believes that the government only wants to please their vote bank rather than save the country, and also using the flood tragedy to gate crash the IMF ecosystem.

Business

Exchange achieves all-time high: KSE-100 index surpasses 72,500 points

Published

22 hours ago

Farwa

With the benchmark KSE-100 index hitting a record-breaking high of 72,501 points, the Karachi Stock Exchange saw yet another incredible rise.

Within Pakistan’s financial environment, investors demonstrated a strong sense of trust in the market as the bullish trend continued.

As a result of the significant inflow of investment and optimism among market players, the index had an amazing 450-point rise during the trading session.

In their analysis of the market’s remarkable performance, financial analysts pointed to a number of causes for the upward trend, such as encouraging economic data, robust company profits, and the government’s proactive measures to promote economic expansion.

The durability and upward momentum of the market have also been greatly aided by continuous infrastructural investments and efforts meant to boost investor confidence.

In the meantime, interbank rates increased by six paisas, and the US dollar’s value saw a slight rise in the currency market. As a result of the current market conditions and the dynamic nature of foreign exchange swings, the dollar was quoted at Rs 278.45 in the interbank market.

Business

The investment plan for K-Electric will be audited every three months.

Published

22 hours ago

Farwa

In light of K-Electric’s inability to persuade NEPRA with its Rs. 484 billion investment plan, the regulatory body has decided to hold off on making changes to the utility’s Transmission & Distribution Investment Plan until FY 2030.

As stated in the order, the NEPRA will select the terms of reference (ToR) for the third-party audit in addition to announcing the quarterly audit. A report on the company’s investment plan’s progress will need to be submitted every quarter.

A performance report would also be required under the investment plan by K-Electric, Karachi’s only power distribution utility, according to the statement. A secure mechanism to avoid electrical mishaps was also mandated by the authority to the utility.

In the meantime, the power distribution firm stated in a statement that the investment plan will boost the utility’s infrastructure to meet present and future demands, decrease transmission and distribution losses, and increase customer base growth.

With investments totaling Rs. 544 billion, KE has been able to more than halve its T&D losses and quadruple its customer base and power consumption since privatisation, according to the statement.

A hearing in March 2023 was held to inform stakeholders about the projects that KE management had planned for FY2024–FY2030, and the statement claimed that the plan had been presented in compliance with regulatory requirements.

In terms of investment areas including expansion, energy loss reduction, network rehabilitation, maintenance, and safety, KE claimed to have clearly defined priorities and projects for this era.

The plan calls for the construction of transmission lines and grids, which will increase the dependability of KE’s network and make it possible to take on more electricity from the National Grid.

In order to manage the city’s needs through targeted investments and tech-based interventions, CEO KE Moonis Alvi said, “We are looking to invest $2 billion in Transmission and Distribution over the next 7 years.” The work of all the stakeholders who have contributed to this trip and who will help us modernise our infrastructure and get ready for the future is something I’d like to acknowledge.

The investment plan is a supplement to the business’s Power Acquisition Programme, which outlines KE’s goal of having 30% renewable energy in its generation mix by 2030. As part of its efforts to provide everyone with access to reasonably priced energy, the firm has also been granted regulatory permission for its RFPs for 640 MW of renewable projects.

Business

$399 million in airline revenue is being blocked by Pakistan. IATA

Published

22 hours ago

Farwa

Pakistan and Bangladesh have been urged by the International Air Transport Association (IATA) to promptly release airline profits that are being withheld in violation of international agreements.

“Airlines are unable to repatriate over $720 million ($399 million in Pakistan and $323 million in Bangladesh) of revenues earned in these markets, resulting in a severe situation,” an IATA statement stated.

“Money-denominated expenses like lease agreements, spare parts, overflight fees, and fuel must be paid for in a timely manner by repatriating revenues to their home countries.”

Delaying repatriation raises exchange rate risks for airlines and violates bilateral agreements’ international commitments. In order for airlines to effectively continue to offer the aviation connectivity that both of these countries depend on, Pakistan and Bangladesh must immediately release the more than $720 million that they are blocking, according to Philip Goh, Regional Vice President for Asia-Pacific at IATA.

Pakistan needs to make the difficult repatriation procedure less complicated. According to the statement, this presently includes the need to present audit certifications and tax exemption certificates, both of which create needless delays.

Approximately 425,000 jobs and $2.8 billion in economic activity were supported by Pakistan’s aviation industry prior to COVID-19. Passenger numbers are predicted to increase by more than 2.5 times by 2040 after returning to pre-COVID levels in 2023, according to the statement.