Business

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

Published

2 years ago

Farwa

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.

Business

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

Published

16 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

16 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

16 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.