Karachi October 11 2022: Pakistan central bank did not sell dollars in the interbank to strengthen Rupee says Central Bank Governor.
The Governor claims Rupee strengthening is a result of efficient management, increasing remittances and flows in Roshan Digital Account as evident by decreasing difference between KERB and Interbank rates, increase in export receipts and expectation of flows from financial institutions.
He said, “Central Bank is actively monitoring interbank and Exchange Companies while at the same time keep checks on informal market as well. We are controlling informal market with the help of law enforcement agencies.”
Pakistan Rupee continue to appreciate for the twelfth consecutive session in interbank against dollar and gains PKR 21.74 or 9.97% from recent low of 239.71. Moreover, In Open Market Rupee is closes at 220.0, according to Forex Association of Pakistan.
The floods are likely to result in greater need for some agricultural imports such as cotton and a few perishable food items. At the same time, exports of rice and textiles are likely to be negatively affected. However, these adverse impacts could to a large extent be offset by downward pressures on the import bill from lower domestic growth and falling global commodity prices and shipping costs.
The impact on the current account could be further cushioned by international assistance in the form of current transfers. Pakistan expects additional assistance of USD 4 billion from ADB, WB and AIIB. Moreover, Central Bank also expects just a less than one Billon from United Nations appeal.
Given secured external financing and additional commitments in the wake of the floods, FX reserves should improve through the course of the year.
“Instead of pumping dollars in the interbank, we will focus on ensuring to meet our external liabilities and try to clears the backlog in case of opening of LCs. We have also allowed exporters to import material worth 5 percent of their exports in a recent move” says Governor. “Flows in Roshan Digital Account has been reached to USD 9 million a day from an average of USD 5-6 million and remittances also showing improvement” he added.
At yesterday’s meeting, the Monetary Policy Committee (MPC) decided to maintain the policy rate at 15 percent. The MPC noted the continued deceleration in economic activity as well as the decline in headline inflation and the current account deficit since the last meeting. It also noted that the recent floods have altered the macroeconomic outlook and a fuller assessment of their impact is underway. Based on currently available information, the MPC was of the view that the existing monetary policy stance strikes an appropriate balance between managing inflation and maintaining growth in the wake of the floods. On the one hand, inflation could be higher and more persistent due to the supply shock to food prices, and it is important to ensure that this additional impetus does not spillover into broader prices in the economy. On the other, growth prospects have weakened, which should reduce demand-side pressures and suppress underlying inflation. In light of these offsetting considerations, the MPC considered it prudent to leave monetary policy settings unchanged at this stage.
