KARACHI, Nov 17: Currency experts have warned of brewing balance of payments crisis as State Bank of Pakistan’s efforts to lend support to falling rupee failed despite pumping dollars in massive amounts into the inter-bank market this week.
“In the last five working days of this week the State Bank pumped nearly $200 to $225 million into the inter-bank market to check value erosion of local currency but it could hardly recover 40 to 50 paisa against the US dollar,” said Atif Ahmed, a currency dealer.
He said the central bank sold dollars twice in the inter-bank market during the week to check the dollar’s rise, but the move proved temporary as the US dollar again started appreciating against the rupee.
Last week the dollar crossed all boundaries to set record at Rs96.30 which prompted the State Bank to halt the sharp rising trend of the greenback. The dollar was traded at Rs95.98 on Friday while it was traded at Rs95.65-70 after the injection of dollars by the SBP.
Market sources said demand for dollar was still high while at least three banks on behalf of the State Bank pumped dollars in the market to cool down the aggressive mood of the US currency. The price suddenly fell by nearly 50 paisa but the exchange rate again tilted in favour of the greenback.
“Now the uncertainty is high. The rates are not sustainable for a longer period particularly in the wake of melting dollar reserves and heavy debt payments due in coming months,” said Anwar Jamal, a leading currency dealer.
Currency dealers both in the inter-bank and open market said the latest dollar surge was also due to payment of another installment to the IMF this month.
When contacted the State Bank said the country would pay 258.4 million SDR (special drawing rights) that would be equal to around $400 million to the IMF on 23rd of this month.
The country’s foreign exchange reserves fell to $13.84 billion in week ended November 9, with the central bank’s reserves at just $9.24 billion and commercial banks at $4.6 billion.
Analysts said the dollar is gaining value due to numerous factors in the international market as well as against Pak rupee. One of the most important factors was the persistent debt and financial crisis in European Union which has weakened the euro, paving way for the dollar to gain.
Japanese yen have been under pressure because of weakness of its economy while Chinese are benefiting by keeping the low price of Yuan to boost their exports. These two factors also have help0ed strengthened the US dollar.
“Pressure is also felt in open market as demand is high, supply is low and the price difference between the open and banks’ market has been increasing,” said Malik Bostan, Chairman Exchange Companies Association of Pakistan.
However, he said the exchange companies were still depositing 80 per cent of their foreign currencies in the banks which mean consumer demand is not so high.
Currency dealers said economists have been predicting that by end of this fiscal year Pakistan could have less than $5 billion in its account, if the inflows through IMF or other donor agencies do not start during the year.
“This is haunting for the currency dealers and encouraging hoarders to keep sitting on dollars for a ‘good deal’,” said Anwar Jamal.