KARACHI: The US dollar continued to lose ground against the Pakistani rupee Wednesday despite deadly floods causing huge economic losses to the country.
Early estimates put the damage from the floods at more than $10 billion, government officials have said, adding that the world had an obligation to help the South Asian country cope with the effects of man-made climate change.
The major reason for the rupee’s uptrend was due to the approval from the International Monetary Fund’s (IMF) Executive Board to release the much-needed $1.17 billion tranche.With the revival of the IMF programme, Pakistan is expected to receive funds from multilateral and bilateral organisations, apart from friendly countries.
The rupee was changing hands at 218.50 per dollar after gaining 1.62 during intraday trade in the interbank market, down from yesterday’s close of 220.12.
Economist and former adviser to the federal ministry of finance Dr Khaqan Hassan Najeeb said that the IMF programme resumption would certainly help build Pakistan’s depleting foreign exchange reserves, but the flood devastation has increased the country’s foreign financing needs.
“This, along with the expected slowdown in agricultural growth and a subsequent slowdown in demand from rural areas is expected in coming months,” he told Geo.tv, noting that a sizable volume of motorbikes and four-wheelers are sold in rural areas.
The economist also said that the Pakistan Stock Exchange is expected to trade range bound as the country determines the impact of damage and slow down of the economy.
Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha had earlier told Geo.tv that he expects the local unit to keep appreciating and fall to 200 in the coming days.
Paracha highlighted that as the deal materialised after a long delay, the government took some measures for fiscal tightening that led to an increase in smuggling.
Apart from the smuggling of dollars to other countries, Paracha said that the heavy regulatory duties imposed on imports led to an increase in the smuggling of commodities — which resulted in a shortage of dollars.
He noted that although the amount from the global money lender amounted to $1.1 billion, it will pave the way for Pakistan to get additional funds from other multilateral and bilateral organisations.
Paracha said that the foreign direct investment would also increase and expected that the overall economy would witness a boost in the coming days.