ISLAMABAD: The Pakistani rupee has strengthened against the United States dollar on the back of surging exports and foreign remittances, with further gains likely next year, experts said on Wednesday.
The rupee started depreciating in March, as the coronavirus outbreak began to hit the economy and foreign investors withdrew their funds. It reached an all-time low of 168.43 per dollar in August. In the past 72 days, however, the Pakistani currency has gained Rs10, or 5.9 percent, against the greenback. One dollar was worth Rs158.49 on Wednesday.
“If the dollar depreciates further from 155 after January, then it may go down to 125 against the rupee from where it has started to appreciate rapidly over two years back,” Malik Bostan, president of the Forex Association of Pakistan, told Arab News.
The increase, he said, would be due to a decline in the country’s imports and increasing investment by overseas Pakistanis in projects under Roshan Digital Account — a government initiative allowing expatriates to remotely open bank accounts in their country without visiting a bank branch, and invest in different sectors, including the real estate.
Samiullah Tariq, head of research at Pakistan-Kuwait Investment, said the country’s foreign remittances have increased by 30 percent in the past four months, with one of the main boosters being the government’s anti-money laundering policies.
“The anti-money laundering efforts undertaken by the government have been a major booster which has resulted in lower foreign currency illegal outflows from the country,” he told Arab News, adding that demand for dollars has also been lower.
"As Pakistan has transitioned to a market determined currency valuation, so that has been a major reason that supply of foreign currency and dollars is more and demand has been lower due to lower oil price and imports," he said.
Another reason behind the rupee appreciation is disruption in travel due to COVID-19. Many Pakistani expats who normally would bring cash from abroad, have used official banking channels, resulting in higher remittances.
“The stronger rupee will help control inflation as prices of cooking oil, petroleum products, and pulses are denominated in dollars,” Tariq said.
The rupee gain comes on the heels of a record current account surplus of $792 million in the first quarter of this fiscal year as compared with a deficit of $1.5 billion during the same period last year.
Some economists, however, are these actually reflect skeptical whether the currency appreciation reflect the reality on the ground.
“We have contracted our imports with stagnant industrial growth," senior economist Dr. Kaiser Bengali, told Arab News. "The artificial rupee appreciation or current account surplus isn’t a good sign for our economy."