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Rupee’s downward spiral continues unabated, breaches 245 threshold in open market

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  • Rupee has lost over 8.27% in last twelve sessions.
  • Local unit closes at 237.91 in interbank market.
  • Analysts believe rupee is unlikely to reverse downward trend. 

KARACHI: The Pakistani rupee reeled to a record low against the US dollar on Monday, breaching the critical threshold of 245 against the greenback in the open market.

With a fresh decline of Rs4.40, the local currency closed at Rs245.40 against the greenback in the open market.

Meanwhile, according to data released by the State Bank of Pakistan (SBP), the rupee closed at 237.91 after losing Rs1.07 (or 0.45%) as it inches closer to an all-time low of 239.94 hit on July 28.

The fall can be attributed to several factors, including the ongoing surge in dollar demand from local importers, amid the drying dollar reserves of the country and rising import bills in the wake of the worst floods, among others.

Speaking to Geo.tv, Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq cited two major reasons behind the downfall of the rupee which include: import pressure and a severe liquidity crunch.

“The pressure of Peshawar foreign market — led by Afghan trade — is weighing on the local currency as the demand for greenback is more while supply is less,” he said.

In line with the massive decline of nearly Rs8 or 3.7% registered last week, other analysts also expect the local unit to hit a fresh all-time low against the US dollar this week.

Financial pundits believe that the rupee, which lost over 8.27% of its in the last twelve consecutive trading sessions, is unlikely to reverse the downward trend and may depreciate more value.

In a major economic development, the Saudi Fund for Development (SFD) on Sunday confirmed the rollover of $3 billion deposits maturing on December 5, 2022, for one year, said the State Bank of Pakistan (SBP) on Sunday.

However, analysts believe that the announcement is unlikely to alleviate pressure on the rupee, especially since there will be no material impact on the country’s foreign exchange reserves.

Commenting on this, Tariq said: “The market did not see the direct impact of the SFD development because it was just the government’s attempt to maintain foreign exchange reserves.”

The rupee has lost 13.90% of its value during the ongoing financial year of 2022-23. However, it shrank 28.81% in the calendar year 2022 as the demand for the US dollar remained high in the market.

Tariq believes that the rupee-dollar parity will improve within a month as a decline in international oil prices and prudent government policies will give the local unit a direction to move upwards.

Markets to normalise within 15 to 20 days: Miftah

A day earlier, Finance Minister Miftah Ismail said that the global markets were “jittery” about Pakistan, given the economy had suffered at least $18 billion in losses after the floods, which could go as high as $30 billion.

“Yes, our credit default risk has gone up, and our bond prices have fallen. But, I think within 15 to 20 days, the market will normalise, and I think will understand that Pakistan is committed to being prudent,” he had said.

Pakistan’s next big payment — $1 billion in international bonds — is due in December, and Miftah said that payment would “absolutely” be met.

Central bank reserves stand at $8.6 billion, despite the influx of $1.12 billion in IMF funding in late August, which are only enough for about a month of imports. The end-year target was to increase the buffer up to 2.2 months.

Miftah said Pakistan will still be able to increase reserves by up to $4 billion, even if the floods hurt the current account balance by $4 billion in more imports, such as cotton, and a negative impact on exports.

However, he estimated the current account deficit will not increase by more than $2 billion following the floods.

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The inaugural flight of Azerbaijan Airlines is between Baku and Karachi.

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The national airline of Azerbaijan launched direct flights from Baku to Karachi today. There will be two weekly flights on this route, on Thursdays and Sundays.

The first flight will land in Karachi, and Azerbaijan’s ambassador, Khazar Farhadov, will be there to greet it.

This evening also marks the departure of the inaugural flight from Karachi to Baku, in addition to the arrival of the flight from Baku.

Azerbaijan Airlines said last month that it would be growing its network and flight operations in Pakistan.

Aviation insiders have verified that Azerbaijan Airlines is preparing to launch service to Karachi in the coming month of April.

In addition to its current services in Islamabad and Lahore, the airline plans to launch its Karachi route on April 18, with the inaugural flight anticipated to depart on that date.

Azerbaijan Airlines has been given permission to operate flights on the Karachi route, according to sources within the Civil Aviation Authority (CAA).

Following a bilateral agreement between the two nations, Azerbaijan Airlines has been given permission to extend its operations in Pakistan.

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Fly Jinnah opens a new route internationally.

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Two weekly flights will be the starting frequency of the new route, which will connect the two cities.

According to a representative for Fly Jinnah, the company is pleased to announce the opening of a third international route from Islamabad to Muscat, the capital city of Oman, marking another significant milestone after the successful debut of flights from Islamabad and Lahore to Sharjah.

According to him, this development is in line with our goal of giving our clients more options for reasonably priced, value-driven local and international air travel.

The airline serves five main cities in Pakistan: Karachi, Lahore, Islamabad, Peshawar, and Quetta. Its fleet consists of five Airbus A320 aircraft, all of which are contemporary.

In addition to the current flight path to Sharjah, United Arab Emirates, this new route expands Fly Jinnah’s network of foreign destinations.

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Tajir Dost app: traders don’t seem interested in registering

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To tax retailers in Pakistan, the Tajir Dost app was released. The sources stated that the government hopes to tax 3.5 million merchants through the app.

Ajmal Baloch, the president of All-Pakistan Anjuman-e-Tajran, stated that he made reservations with FBR on the SRO within a week.

The Federal Board of Revenue (FBR), according to him, cannot be a “Tajir Dost” because of its unethical actions.

Baloch believed that since electricity bills allow traders to pay a predetermined advance income tax, further taxes are unnecessary.

The trader, according to him, is already paying thirteen different kinds of taxes on the commercial meter. “A trader already pays between Rs. 15,000 and Rs. 20,000 in taxes annually, but you are requesting Rs. 1,200 per month in taxes.”

Mr. Ajmal summoned representatives of the Federal Board of Revenue (FBR) to a meeting with the trade associations to talk about the indirect taxes that the merchants are paying.

Additionally, he claimed that FBR officers are charging the traders, the majority of whom are less educated, “monthly charges.”

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