Pakistan confident in defending $1.5 billion fuel subsidy at IMF review

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March 4, 2022 (MLN): Despite a choppy path through rising commodity prices in the international market, the Pakistani rupee (PKR) managed to gain 33 paisa against the US dollar as the currency closed day trading at PKR 177.5 at the interbank market.

During the day, the rupee traded within a very narrow range of 20 paisa per USD, with an intraday high bid of 177.75 and an intraday low bid of 177.60.

While the currency has been on a bumpy ride all week, it lost 39 paisa against the dollar as it closed last week at PKR 177.11 per USD.

However, the currency took some breather on Tuesday, posting a small gain of 6 paisa.

The ongoing instability in the interbank market is linked to the geopolitical disruption created after the Russian invasion of Ukraine, which sent prices of global commodities into an upward spiral due to the threat of a supply shortage in the coming days.

In addition, Ukraine’s western allies have also stepped up sanctions as it has shut down a few Russian banks from SWIFT’s financial network while limiting Moscow’s ability to deploy its $630 billion foreign reserves.

In addition, the trade deficit as a result of large import bills has put pressure on the local unit. In the month of February, however, Pakistan’s trade deficit widened to $3.1 billion, compared to a deficit of $3.4 billion in the previous month, down 9.7% MoM while imports fell 2.3% MoM fell.

On foreign exchange reserves, the rapid growth in the trade deficit is driven by higher imports and a slight slowdown in remittances, pushing SBP’s reserves to $16.46 billion, which could put pressure on the current account, says Asad Rizvi, the former head of the treasury at Chase. said Manhattan.

In February, foreign exchange reserves continued to be under pressure, falling for the fourth straight week, he added.

The country’s total liquid foreign exchange reserves declined $350.9 million or 1.51% WoW to $22.87 billion during the week ending February 25, 2022, compared to $23.22 billion in the previous week.

Meanwhile, the local unit has lost Rs 19.95 against the USD from July’21 to date, while in CY22 it has depreciated by 0.78 paisa with the month-to-date (MTD) position down 0.018 %, according to data collected by Mettis Global.

Over the past 52 weeks, PKR has lost 14.2%, reaching its low of 178.235 on December 29, 2021 and reaching its high of 152.28 on May 7, 2021.

In addition, the local unit has depreciated by 8.19% since its high on October 25, 2021, at EUR. While the local unit has a weekend of 11.34% against GBP since its peak on April 9, 2021.

Within the open market, PKR traded at 177.50/178.50 per USD.

Meanwhile, the currency gained 1.7 rupees against the British pound as the day’s closing price was PKR 236.45 per GBP, while the previous session ended at PKR 238.18 per GBP.

Similarly, the value of PKR rose 1.8 rupees against EUR, which closed today at PKR 195.42 at the interbank.

On the other hand, within the money market, the State Bank of Pakistan (SBP) conducted an Open Market Operation (OMO) in which it injected Rs 2.33 trillion into the market over 7 days at 9.76 percent.

The overnight repo rate near the end of the session was 9.70/9.90 percent, while the 1-week rate was 9.75/9.85 percent.

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This post Pakistan confident in defending $1.5 billion fuel subsidy at IMF review was original published at “https://mettisglobal.news/pakistan-confident-of-defending-1-5bn-fuel-subsidy-at-imf-review/”

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