KARACHI: Pakistan’s national currency slid against the US dollar on Friday as the country’s foreign currency reserves continued to deplete during the outgoing week due to year-end payment settlements, said dealers and analysts.
The Pak rupee lost its value by 1.5 percent in the last seven days. It depreciated to Rs 176 against the American currency on Friday before closing at Rs 166.70.
“The rupee is under pressure due to a surge in the demand for US dollars. This is understandable since we have almost reached the end of the financial year when most payments are squared by companies ahead of their closings,” Samiullah Tariq, head of research at the Pakistan-Kuwait Investment, told Arab News.
“The declining exports and remittances are key reasons for the unstable supply of the US dollar,” he added.
Pakistan’s exports declined by 33 percent to $1.4 billion in May 2020 as compared to the same period last year, though they increased by 46 percent when compared to the situation in April 2020.
The county also suffered a loss of 18.6 percent due to a decline in its remittances. The reduction in the money inflow from abroad was caused by job losses of overseas workers and closure of international borders due to the coronavirus pandemic.
Analysts said that currencies of other countries had also come under pressure since a decline in exports and flight of capital from regional markets had resulted in an environment of overall economic instability.
“The flight of capital was witnessed in the regional market as investors looked for safe heavens like the United States and Europe,” Tariq noted.
Due to the outbreak of COVID-19, the rupee depreciated by 3.9 percent in just one month during July-March FY2020, official statistics indicate.
Dealers maintained the pressure on the country’s national currency was likely to ease after the end of the current fiscal year on June 30, 2020.
“Due to the COVID-19 pandemic, Pakistan’s petroleum imports were halted. Now the companies are opening LCs [Letters of Credit] which is also exerting pressure on our currency. As soon this process comes to an end, the demand for dollar will normalize,” Malik Bostan, chairman of the Exchange Companies Association of Pakistan, told Arab News.
He added that the national currency would further stabilize if the government’s negotiations with friendly countries for the conversion of short-term deposits into long-term loans materialized.
Earlier this month, Dr. Abdul Hafeez Shaikh, the prime minister’s adviser on finance and revenue, told Arab News in an exclusive interview that Pakistan was in talks with Saudi Arabia, the United Arab Emirates and China to convert the $7.7 billion short-term deposits into longer tenors.
Last year, when Pakistan was going through its worst balance of payments crisis, Islamabad approached these friendly countries for financial assistance. As a result, the country received $7.7 billion in short-term deposits through bilateral arrangements which provided it the much needed economic support.
Pakistan’s currency slides against US dollar ahead of year-end settlements
https://arab.news/634v3
Pakistan’s currency slides against US dollar ahead of year-end settlements
- The country’s national currency lost 1.5 percent of its value during this week amid a decline in exports and remittances, say analysts
- Experts believe the situation will improve after the end of the current fiscal year
Pakistan’s domestic power sources cushion LNG supply risk from Middle East war — minister
- Pakistan less exposed to LNG disruptions as domestic power rises, Power Minister Leghari says
- 74% of power now from local sources, targeting 96%, LNG accounts for 10% of power generation
KARACHI: Pakistan’s growing reliance on domestic power, including solar and wind energy, nuclear reactors, coal and hydropower, has reduced its vulnerability to global LNG supply disruptions, Power Minister Awais Leghari told Reuters.
The war in the Middle East threatens shipments from Qatar, the world’s No. 2 producer after the US which supplies most of Pakistan’s imported LNG, used to fuel power plants during peak electricity demand.
“Pakistan has been steadily increasing reliance on indigenous energy resources, and about 74% of our electricity generation now comes from local sources,” Leghari said, adding the government aims to raise that above 96% by 2034.
The figures have not been previously reported.
“The people-led solar revolution, and earlier decisions to invest in nuclear, hydropower and local coal have all played a role in increasing Pakistan’s self-reliance,” he added.
Pakistan has long struggled with electricity shortages and historically faced hours of daily load shedding during peak summer demand.
The country now has surplus generation capacity after adding coal, LNG and nuclear plants, while demand growth has slowed and the use of rooftop solar has surged, at times exceeding grid demand in some hubs.
Outages still occur in parts of the country due to theft, line losses and financial constraints, rather than a lack of power.
‘WORST-CASE SCENARIO’
Qatar halted LNG production earlier this month, and Asian nations, who buy 80% of its output, are scrambling to meet the shortage.
LNG now accounts for about 10% of Pakistan’s electricity generation, mainly used to meet evening demand peaks and stabilize the grid, Leghari said.%
During the global energy crisis triggered by Russia’s invasion of Ukraine in 2022, the country was forced to cut power for extended periods after failing to secure LNG cargoes on the spot market.
“Even if LNG was disrupted or became too expensive, the impact on production capacity, industry or agriculture would be minimal,” Leghari said.
But he said prolonged disruptions could still lead to additional shortages during summer, when demand surges from the use of air-conditioners.
“In a worst-case scenario, if LNG cargoes stopped for several months, Pakistan might see one to two hours of load shedding during peak summer evenings,” Leghari said.
Such outages would likely affect some urban and rural areas, not industry or agriculture, he said, adding Pakistan is developing battery storage to shift excess daytime solar to evening peaks.
Pakistan canceled 21 LNG cargoes due in 2026-27 under a long-term deal with Italy’s Eni as domestic power and solar growth cut gas demand.
LOCAL AND GREEN
Pakistan is not expected to invest in any source of power that could put it at risk in terms of energy security,” Leghari said, saying the government’s plans for the next six to eight years is to focus on indigenous clean power.
About 55% of electricity generation now comes from clean sources, which the government aims to raise above 90% by 2034, Leghari said.
Hydropower produces about 40 terawatt hours of electricity annually, while nuclear generates roughly 22 TWh and domestic coal about 12 TWh, according to the minister, forming a significant share of Pakistan’s electricity supply without relying on imported fuel.
Rooftop solar installations have surged to more than 20 GW across Pakistan, with behind-the-meter capacity estimated at 12–14 GW and possibly up to 18 GW, sharply reducing daytime grid demand, he said.
Hydropower output also rises in summer as river flows increase, adding up to 7,000 megawatts of capacity and helping meet higher electricity demand from air-conditioning.
