File photo. Aamir Qureshi—AFP
Pakistan’s national currency made its strongest-ever single-day recovery—in absolute terms—against the U.S. dollar in the interbank market on Wednesday, improving by Rs. 9.58, or 4.19 percent.
According to the State Bank of Pakistan (SBP), the dollar stood at Rs. 228.8 at the close of market on Wednesday, compared to Rs. 238.38 a day earlier. Business journalist Khurram Husain, in a series of posts on Twitter, credited the recovery to a “sharp drop” in import payments and exporters “rushing to close their open positions.” Referring to Finance Minister Miftah Ismail’s claims of the country needing to import much less fuel in August due to near-record stockpiles, he said this month would likely see even lower oil-related payments. “Rupee reverting to where it should be after a brief spell of extraordinary pressure in July,” he added.
The Pakistan Bureau of Statistics (PBS) on Tuesday released data showing the import bill for July had reduced by 12.81 percent to $4.86 billion from $5.57 billion a year earlier. Similarly, it declined by 38.31 percent from June, when it had stood at $7.74 billion.
Analysts have said another reason for the recovery is the International Monetary Fund (IMF) confirming, a day earlier, that Pakistan had completed the last prior condition for the revival of a suspended Extended Fund Facility that would see the release of $1.2 billion to Islamabad in late August. They maintained that the rupee had been “undervalued” for several weeks, and its “natural” value stood at around Rs. 200 to the U.S. dollar.
Another factor cited by several market experts is that the central bank and the federal government have finally taken steps to reduce the smuggling of dollars into neighboring Afghanistan, noting this has been creating an artificial scarcity that had driven up the value of the greenback.