KARACHI: The uncertainty attached to the change of government within a few days hit the open market where the dollar appreciated by Rs3 to Rs295 on Monday.

The State Bank reported the dollar rate at Rs287.43 in the interbank market compared to Rs286.97 in the previous session, recording an increase of 46 paise.

Bankers said the rupee depreciation is a part of arrangements reached with the IMF for a $3bn loan programme, adding that there was no chance for the local currency to gain strength during the entire fiscal year.

The State Bank reserves still stood at above $8 billion but could fall with the outflow of dollars, particularly for debt servicing. The country needs $25bn for debt servicing in FY24.

Currency dealers and experts said the dollar during the current quarter could cross Rs300 as exporters were not selling their holdings and waiting for the policies by the future caretaker government.

“Exporters seem to be reluctant to offload their exports,” said Faisal Mamsa, CEO of Tresmark, adding that the exporters would hold their dollars if (during the next 90 days of caretaker government) the rupee traded above 303/dollar and sell them when the local currency is under 303/$.

As per the calculation, the current dollar price is Rs287 while Karachi Inter-Bank Offered Rate is 23 per cent for 90 days that is equal to Rs16, meaning the rate will be 303 per dollar. But there are very few people who think 303/$ will not be breached, said Mt Mamsa.

With a caretaker government scheduled to take over this week, analysts expect the rupee to weaken, but fear it will further hike inflation, something which everyone wants to avoid. In the last two weeks, the market noted a lot of payments being cleared on the import side.

Govt to raise Rs8.2tr

The government will raise Rs8.2 trillion through the auction of treasury bills in the next 70 days while it will also raise Rs1,150bn through Islamic bonds and Pakistan Investment Bonds (PIBs).

The State Bank released the auction calendar on Monday that showed the government will raise the highest amount of Rs8.250tr from Aug 9 to Oct 18. This huge borrowing is not enough to meet the maturity amount which is about Rs8.905tr in the same period. The government has planned to raise Rs510bn through the auction of Islamic bonds (Ijara Sukuk) during the same period. At the same time, the government will borrow Rs640bn through the auction of PIBs.

Published in Dawn, August 8th, 2023