Federal Budget

PKR appreciates against dollar in interbank, open market

PKR appreciates against dollar in interbank, open market

Business

Difference between official and open market exchange rates for dollar is now 0.7pc

KARACHI (Web Desk/Dunya News) – The Pakistan rupee continued strengthening on Thursday amid the crackdown on black market as it made a Rs2.03 gain against the US dollar at the end of the trading session. 

The weak local currency has paralysed the economy by fuelling inflation and enhancing the cost of doing business. 

It means the rupee was available for an official exchange rate of Rs304.95 in the interbank trading against the previous closing of Rs306.98. 

However, the gains were even bigger in open market where the dollar was last traded by Rs308, representing a gain of Rs4 during Thursday’s ongoing session.

Thus, the rupee had grown stronger by Rs26 against the US dollar so far in the last three trading days in open market as sources say authorities tightened their grip on exchange companies, relentlessly pursuing illegal currency dealers across the country.

It also means that the difference between the official and open market exchange rates is now 0.7 per cent against the 1.25pc limit set by the International Monetary Fund (IMF). 

Meanwhile, this surge is not limited to just to the dollar as the rupee has been making gains against other top currencies as well – with the euro now traded for Rs332 against the historic high of Rs355 recorded earlier. It means the rupee is up Rs23 in the recent days in open market.

Similarly, the sterling is currently traded for Rs388 after a decrease of Rs9 with the rupee making a net gain of Rs30.

On the other hand, the Saudi riyal lost Rs1.50 against the rupee on Thursday and is now traded for Rs81.80 while the UAE dirham is down Rs3.20 to the current exchange rate of Rs86.80.

A strong and stable rupee is vital to Pakistan’s interests as devaluation has not only triggered inflation in the country but also resulted in higher interest rates – a formula applied by central banks around the world despite its negative effects on economy, especially in the case of poor and developing countries.

Read more: Dollar pull effect: How a weaker currency makes you hostage to dollar

Currently, Japan is the only G7 economy which moving against the policies followed by its peers and the advice of international financial institutions.

Read more: Japan won't rule out options if currency speculation pulls yen down against dollar

On the other hand, the finance ministry has warned that the massive hike in fuel prices and power tariff in August would increase inflation in the coming months, in yet another indirect admission of the policy failures guided by the IMF.

Read more: Fuel, electricity price hikes to boost inflation: Ministry of Finance

And all the problems that Pakistan is currently facing a product of the rupee depreciation which has wide ranging effects from triggering and fueling inflation to reduced purchasing power and food security crisis – directly impacting people and businesses.

Devaluation incentivizes the grey economy [perhaps black economy is the right term]. There is no need to invest in manufacturing or industries or agriculture when hoarding the US dollar and spending the finances in real estate are providing huge profits.