Karachi: The rupee projected to decline against the dollar this week due to higher import payments in US dollars.
On Friday, the local unit closed at 286.93 against the US dollar, up from Monday’s 286.19. It lost 0.25% against the dollar.
In its weekly commentary, Tresmark stated: “June, though, has traditionally been a heavy outflow month due to defence-related payments. This will give some volatility in rupee rates which may go up as 290 per dollar in the coming weeks.”
“Considering the latest trade deficit of $2.1 billion. We now revised the projected current account to a $470 million deficit,” it added.
Moreover, The note also noted that open market rates may remain distorted until there is positive news from the International Monetary Fund (IMF) or a steady stream of inflows, especially as importers (other than select industries) are asked to settle their imports by any means other than banking channels (thus increasing grey market/hawala volumes).
While, Friday saw the government’s 2023-24 budget. The government faces a debt financing dilemma. The centre hopes to fill the financing gap by emphasizing domestic sources.
66% of FY24 expenditure, or Rs5 trillion, went to debt servicing under domestic borrowing.
Moreover, Banks finance 62% of the deficit domestically. According to Arif Habib Limited, the government expects to raise Rs2.5 trillion ($8.6 billion) in external funding, mostly from commercial and Eurobonds.
In the current economic scenario, acquiring external financing will be difficult.
“Considering the imminent end of ongoing IMF programme in June, expecting external borrowing of this magnitude appears to be a far-fetched notion,” the paper added.
The finance minister also stressed that IMF conversations are imminent.
The report said that Dar suggested at reprofiling external debt, which would relieve the country’s financial load by spreading repayment obligations over a longer period.
