KARACHI: Soaring global crude oil prices are expected to keep the rupiah under pressure despite the move by the State Bank of Pakistan (SBP) to support the local currency.
Rising international oil prices coupled with the country’s declining foreign exchange reserves have kept the rupiah under pressure over the past week.
The rupee fell 53 paisa against the dollar over the past week to end at 176.77 rupees, down from 176.24 rupees in the week ended January 21, 2022.
The local currency rallied slightly on Friday, after the Senate passed the State Bank of Pakistan (SBP) Bill 2021 (Amendment) Bill 2021 on Friday, January 28, paving the way for the resumption of the Fund’s program. international monetary policy (IMF).
The IMF Executive Board is due to meet on Feb. 2 for Pakistan’s sixth review of the Extended Financing Facility (EFF).
The success of the sixth review and the disbursement of approximately $1,059 million should allow the local currency to show some growth. However, rising global crude oil prices remain a constant challenge for the rupiah to sustain against the dollar.
The local currency is expected to show growth against the greenback as the government, in the Finance (Supplementary) Bill 2021, withdrew exemptions and concessions worth Rs 343 billion. These concessions were available on various non-essential and luxury items.
Similarly, the SBP of January 5, 2022 ordered exporters to realize their export earnings within 120 days from the date of shipment instead of 150 days.
These measures were expected to ease the burden on the exchange rate by reducing the country’s import bill, but soaring oil prices on the international market continued to push the local currency on a downward trajectory.
Brent crude oil was trading at around $88 a barrel throughout the week as it hit a seven-year high above $90 a barrel on Wednesday as the market balanced concerns about the oil tightening. global supply with expectations that the US Federal Reserve will soon tighten monetary policy. Pakistan is the net importer of petroleum products to meet domestic energy demand. The country’s oil bill rose sharply by 113.39% to $10.18 billion in the first half (July-December) of 2021/22, from $4.77 billion in the corresponding semester of 2021/2020. Previous exercice.
The country’s liquid foreign exchange reserves fell by $867.6 million to $22.48 billion in the week ending January 21, 2022, from $23.35 billion in the week ending January 14, 2022.
The drop in foreign exchange reserves came as the country made payments on the import bill and external debts. The import bill maintained 69% growth to $40.58 billion in the first half (July-December) of fiscal year 2021/22 from $24.45 billion in the same half of 2021/2020. ‘Previous exercice.