The rupee ended the week on a negative for the fifth straight session, as rising oil prices pushed the local currency further down against the US dollar. It depreciated 0.28% in the inter-bank market on Friday.

As per the State Bank of Pakistan (SBP), the rupee closed at 180.57 after a day-on-day depreciation of 50 paisas. On Thursday, the currency closed below the 180 level for the firs time, amid the ongoing Russia-Ukraine conflict.

Rising oil prices and a looming threat of a widening current account deficit has kept the local currency on the back foot for quite some time now.

On a weekly basis, the Pakistani rupee has lost 1.15% against the US dollar. It has devalued by over 12.7% during the current fiscal year, and by 15.6% since its most-recent high, achieved on 14 May 2021.

Oil prices, which have become a headache for Pakistan’s external accounts, extended their gains on Friday after slim progress in peace talks between Russia and Ukraine raised the spectre of tighter sanctions and prolonged disruption to the oil supply.

Brent crude futures rose 82 cents, or 0.8%, to $107.46 a barrel, while the US West Texas Intermediate (WTI) crude futures climbed $1.14, or 1.1%, to $104.12 a barrel, adding to an 8% jump on Thursday.

“Oil prices shot up significantly after a rise in escalation between Russia and Ukraine, and even hit $130 per barrel,” said ex-finance minister Hafiz A Pasha, while talking to a private channel.“Fortunately, it has dropped considerably from its peak, which will ease pressure on our import bill.

However, prices of other commodities including wheat and palm oil continue to rise. This will push up the imports.“

Pasha said it is worth keeping an eye on what level Pakistan’s current account deficit (CAD), which rose to the $11.58 billion mark during July-Jan of FY22, reaches in February. “If CAD drops then the situation would stabilise,” he said.

Pasha said that consecutive declines in Pakistan’s foreign exchange reserves are a concerning development.

According to data released by the SBP, foreign exchange reserves held by the central bank registered a drop of 2.35% on a weekly basis. On March 11, the foreign currency reserves held by the central bank were recorded at $15,831.6 million, down $381 million compared with $16,212.2 million on March 4.

Asad Rizvi, former Country Treasurer of Chase Manhattan Bank, expressed concerns over the fall in FX reserves.

“This is the sixth conservative fall [of FX reserves] since February,” tweeted Rizvi.

He added that the ongoing domestic political unrest and talks with the International Monetary Fund (IMF) are “also giving jitters that do not support PKR.”

This story was originally published in Business Recorder on March 18, 2022.