After remaining stable for a day, Pakistan's rupee was back to its depreciating ways, weakening 0.1% against the US dollar in the inter-bank market on Thursday.

As per the State Bank of Pakistan (SBP), the rupee closed at 176.92 against the USD after a day-on-day depreciation of 18 paisas or 0.10%, as compared to Wednesday when the currency appreciated 0.01%.

Last week, the PKR had closed at its all-time record low of 178.24 against the USD before appreciating the following two days to end the year at 176.51.

The decline comes as Pakistan’s trade deficit widened by 106.4% during the first half (July-December) of the current fiscal year 2021-22 and reached $25.478 billion compared to $12.344 billion registered during the same period of 2020-21, revealed the Pakistan Bureau of Statistics (PBS) data.

The country’s exports increased by 24.7% and remained $15.102 billion in the first half of current fiscal year compared to $12.110 billion during the same period of 2020-21.

Imports increased by 65.94% during the first half of the current fiscal year and stood at $40.580 billion compared to $24.454 billion during the same period of the corresponding year, stated the PBS.

“If the increase in imports is due to price hike in the international market, it should be reflected in the exports as well,” Saad Khan, Head of Research at IGI Securities, told Business Recorder.

Khan said that it would take time for the value of imports to come down as the market does not see a substantial price-decrease during the first half of 2022.

“If the situation persists, the interest rate could go even higher as the import bill widens."

However, he added that a rise in Omricon cases could result in a further increase in commodity prices as the hike is from the supply side.

The rupee depreciation comes despite the SBP's latest measure in which it amended foreign exchange regulations for exporters.

On Wednesday, in order to ensure the timely arrival of foreign exchange, the SBP announced to reduce the period of exports proceed realization by 60 days and now the exporters will be required to bring export proceeds within a maximum period of 120 days from date of shipment.

“The new measure is expected to positively impact foreign exchange inflows in the market,” the central bank said.

“The SBP is of the view that a flexible exchange rate has appropriately played its role as a shock-absorber and it is important that its role be complemented by strong exports proceed realization,” it added.

Khan, however, said the latest measure would not have “a material impact on the forex reserves”.

Inter-bank market rates for dollar on Thursday

BID Rs 177

OFFER Rs 177.10

Open-market movement

In the open market, the PKR lost 20 paisas for buying while remaining unchanged for selling against USD, closing at 178.20 and 179, respectively.

Against Euro, the PKR gained 50 paisas for both buying and selling, closing at 199.50 and 201, respectively.

Against UAE Dirham, the PKR remained unchanged for both buying and selling, closing at 49.60 and 50, respectively.

Against Saudi Riyal, the PKR remained unchanged for both buying and selling, closing at 46.80 and 47.20, respectively.

Open-market rates for dollar on Thursday

BID Rs 178.20

OFFER Rs 179

This story was originally published in Business Recorder on January 4, 2022.