Reason to Rise Value of Dollar in Pakistan
Reason to Rise Value of Dollar in Pakistan

Reason to Rise Value of Dollar in Pakistan

The situation in Afghanistan or the imbalance in the country’s foreign exchange, what are the reasons for the rise in the value of the dollar in Pakistan?

 

The depreciation of the Pakistani rupee against the US dollar has caused the exchange rate to become unbalanced and imported products have become more expensive. The rise in the value of the US dollar will also push up the prices of wheat and sugar imported to meet domestic demand.

People working in the currency market cite various reasons for the rupee’s depreciation against the dollar, including the ongoing war between the government in Afghanistan and the Taliban in Pakistan’s neighborhood, among other factors.

According to people and experts working in the currency market, the deteriorating situation in Afghanistan has also raised concerns about Pakistan, which has led to a decline in the country’s dollar. An example of this is the zero investment in Pakistan Investment Bonds in July, which he said is a sign of prudent policy by global investors.

The value of the US dollar in the domestic currency market has crossed 163 Pakistani rupees, and if compared to the month of May, the value of the dollar against the local currency has risen by more than seven percent.

In May this year, the value of one US dollar was 152 Pakistani rupees, which rose to 168 rupees in 2020 and fell back to that level. However, after May, the dollar continued to appreciate and in two months its value Increased to more than Rs. 163.

In these two months, the value of the dollar has risen by Rs. 11 against the national currency. According to currency experts, the fiscal year ended June 30, 2021, with a current account deficit that significantly weakened the local currency against the dollar.

What are the reasons for the rise in the value of the dollar?

Currency experts attribute the rise in the value of the dollar in June and July this year to various reasons, including the growing demand for the dollar, which is essential for imports, as Pakistan’s imports have risen sharply in recent months. 

The PTI government, which wants to reduce the trade deficit and current account deficit by reducing the import bill, had to import large quantities of wheat, sugar and cotton, which greatly increased the import bill.

It may be recalled that Pakistan’s current account deficit in the last financial year was 1. 1.8 billion which was in deficit due to high imports.

Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, He said that although it also includes import of machinery which is good for the country, due to rising prices in the global gas and oil market, more dollars have to be spent on its import.

Malik Bostan, president of the Forex Association of Pakistan, said: “It is true that the trade deficit put a lot of pressure on the local rupee against the dollar because the demand for dollars remained high. At the same time, however, reports suggest that Pakistan needs 20 20 billion to repay its external debt this year.

“These reports have led to an increase in the tendency of importers to buy more dollars so that they can buy cheaper dollars before the dollar rises further in the coming days.”

It may be recalled that the Governor of the State Bank of Pakistan while announcing the monetary policy had said that the country would need 20 20 billion for external payments.

Economist Khurram Shehzad attributed the current rise in the value of the US dollar to the need for dollars for external payments.

Commenting on the issue, Zafar Paracha said, “External remittances of 20 20 billion are huge this year, but the country is expected to receive 87 87 billion this year from exports, remittances, investments and some other sources.” There will be dollars. ‘

How is the situation in Afghanistan increasing the value of the dollar?

Fighting between the government and the Taliban in neighboring Afghanistan over the past several weeks has also had a negative impact on Pakistan’s currency market. Due to the advance of the Taliban in Afghanistan and the deteriorating situation, exports from Pakistan to Afghanistan have come to a complete halt. On the other hand, due to the situation in the region, foreign investment is not taking place. This is evident from the investment figures for Pakistan Investment Bonds (PIBs) in July.

These bonds are government securities in which the proceeds are used by the government of Pakistan to cover the budget deficit.

According to the data for the month of July, there was no investment in these bonds in the month of July, although their rate of return is very attractive and they have a very good return on investment compared to other markets. The same goes for the bonds in these bonds. Out of this, 8.3 million was released in July, which led to an increase in demand for the dollar.

According to currency experts, the current unrest in Afghanistan has made investors reluctant to invest in Pakistan, as unrest in Afghanistan could have the biggest impact on Pakistan.

Zafar Paracha said that the situation in Afghanistan also increased the value of the dollar. He says that due to the strike trade from Afghanistan, the products reach the neighboring country quickly and are paid for quickly, but exports have stopped for the past several weeks due to the situation.

“Pakistan’s annual exports to Afghanistan are between 1.5 billion and 2 billion, which is currently stagnant.”e.n.

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