KARACHI: The exchange rate remained unstable and mostly in favour of dollar during the year 2015.
The US currency appreciated by 4.5 per cent in the inter-bank market and 6.5pc in the open market against rupee during the year.
On Thursday, the dollar was traded at Rs104.90 to Rs95 in the inter-bank market. It was available at Rs101.45 on Jan 1, 2015.
In absolute terms, the dollar gained by Rs4.43 during the year. The US currency jumped to Rs102 on March 20 last from Rs100.45 on Jan 1, 2015. It remained below Rs102 for more than five months and again jumped to Rs105 on Aug 25.
The trend was widely criticised and the government was accused of giving extra support to exporters who were demanding deprecation of rupee.
The local currency further depreciated to Rs105.05 at the end of October. Since then the price continues to fluctuate, and at the end of the year, it remained at Rs104.90 to 95.
In the open market, the local currency witnessed 6.5pc depreciation. The dollar was traded at Rs106.90 at the end of the calendar year.
It looks strange that despite increasing dollar reserves and high inflows through remittances sent by oversees Pakistanis, the local currency continues to devaluate. Foreign exchange reserves of the country shot up close to $21 billion at the end of 2015 from $15.1bn in January 2015. It shows that the country added about $6bn in its reserves.
It is encouraging for the government and the currency markets that reserves in State Bank account have also increased. The SBP added $5.35bn in its account during the year and its reserves rose to $15.719bn at the end of the year from $10.35bn in January 2015.
Despite encouraging reserves position, the exchange rate failed to get stability.
The exporters were asking for depreciation of local currency. Some independent economists were saying that the rupee has overvalued by up to 20pc.
The government was willing to depreciate rupee to appease exporters since exports have been falling for the last couple of years.
The deprecation of rupee has not ended. It will continue to devaluate since the economy is weak, exports are falling, cost of production is higher despite massive fall in oil prices and global market is weak and sluggish for our exportable products, said Atif Ahmed, a currency dealer in the inter-bank market.
The market did not have trust in record reserves since the reserves were made controversial on political ground that most of the reserves will be used to pay back debts since major part of reserves was raised through borrowing.
Another weakness was that current account showed a deficit of over $1bn in the first five months despite very high inflow of remittances which were over $8bn in five months since July 2015.
Currency dealers said that the country would have to pay an estimated $10bn as debt-servicing in 2016 (calendar year) which is clearly a weak point for stability of exchange rate regime.
“Open market is under pressure of authorities to suppress the dollar value but it may continue to rise next year,” said Anwar Jamal, a currency dealer in the open market.
Courtesy : DawnNews