Karachi ( NNP ) The central bank has purchased a record of more than 4.2 billion dollars from the market so far during the current fiscal year, which is half of the country’s official foreign exchange reserves and the International Monetary Fund. The outflows are much larger than the size of the package. While the central bank’s intervention has kept foreign exchange reserves stable at $8 billion despite heavy debt repayments, it has helped keep the rupee’s value as low as Rs278 against the dollar. Played an important role.
According to analysts, in the absence of these interventions, the value should have been less than 250 rupees against the dollar. The central bank refrains from answering questions about buying and selling of foreign currency.
It concealed massive intervention in the interbank market involving transactions of more than 1.1 trillion rupees to buy at least $4.2 billion.
It is rare that central bank purchases exceed the size of the $3 billion IMF program. Part of the reason for going into the IMF program was to obtain additional loans and increase reserves. The country has received foreign loans of $9.7 billion, which was insufficient to meet foreign debt repayments and cover the current account deficit.
Ashfaq Yusuf Tola, a chartered accountant and former chairman of the Revenue and Resource Mobilization Commission, said that due to the central bank’s purchases, the value of the rupee fell by 40 to 45 rupees against the dollar, adding at least 5 percent to inflation. He said that it is in the interest of the government to bring the real parity of the rupee to the dollar to Rs 235 by ending market intervention.
A 5% reduction in the inflation rate will also help to reduce the interest rate, but the counter argument of the authorities is that if the central bank had not bought dollars, the foreign exchange reserves would have decreased to 3.5 billion dollars, which There would have been more inflation. Ashfaq Tola said that the depreciation of the rupee to Rs 278 means exporters are getting Rs 35 to Rs 45 more for every dollar of their export earnings.
Pakistan is again seeking a new IMF program of at least $6 billion, and central bank purchases in less than 10 months are equivalent to 70 percent of the three-year program volume. One reason was the failure of the finance ministry to ensure the inflow of $6 billion due to Eurobonds and foreign trade loans.
According to data released by the Economic Affairs Division and the Central Bank, Pakistan received foreign loans of $9.7 billion during the first nine months of the fiscal year, which is slightly more than 50 percent of the annual budget estimate. According to the Real Effective Exchange Rate (REER), which is a measure of a currency’s value against a weighted average of several foreign currencies, it increased to 104.07 in March 2024, indicating a depreciation of the rupee. Didn’t happen.
