Karachi July 13 2022: Pakistan rupee drop against the dollar by 2.2 paisa at interbank closing despite 125 basis points increase in policy rate by State Bank of Pakistan to arrest inflation and curb demand as traders waited to see if U.S. inflation data later bolsters the case for another supersized Federal Reserve rate hike this month.
In the open market, Dollar moved up by more than 2 Rupee to cross level of 210.
On last Friday, the Monetary Policy Committee decided to raise the policy rate by 125 basis points to 15 percent.
In addition, the interest rates on EFS and LTFF loans are now being linked to the policy rate to strengthen monetary policy transmission, while continuing to incentivize exports by presently offering a discount of 500 basis points relative to the policy rate. his combined action continues the monetary tightening underway since last Sep, aimed at ensuring a soft landing of the economy amid v high growth in last 2 yrs, multi-yr high inflation, & record imports; as well as an exceptionally challenging & uncertain global environment.
Against this challenging backdrop, the MPC noted the importance of strong, timely and credible policy actions to moderate domestic demand, prevent a compounding of inflationary pressures and reduce risks to external stability.
Pakistan position is more peculiar due to historic high trade deficit of USD 48.3 billion recorded for fiscal year 2022, which runs from July to June.
As per the latest data released by Pakistan Bureau of Statistics, trade deficit increased by 55.29 percent YoY to USD 48,259 million on imports of more than USD 80 billion during the fiscal year 2022 which runs from July to June.
The previous high trade deficit was registered in fiscal year 2018 when it recorded at USD 37,583 million on imports of USD 60,795 million.
The Rupee lost nearly 1.1% or 2.2 paisa to close the day at 210.10 in the interbank. While in the open market Rupee is trading at 210.5 against the dollar.
On last trading day, Rupee closes at Rs 207.91 in the interbank market.
Most likely, two tranches of about $918 million each (or $687m Special Drawing Rights, or SDRs) under combined 7th and 8th review of Extended Fund Program would be made available to Pakistan at once in the last week of July of the first week of August.
The government of Pakistan has already received the Memorandum of Economic and Financial Policies (MEFP) from the International Monetary Fund (IMF) on 28th June 2022, which is a crucial step to validate that both sides have reached an agreement for the revival of $6 billion programs.
