KARACHI: The Pakistan rupee on Wednesday continued to trade at historic lows against the United State Dollar (USD) as 2021 draws to a close amid higher imports, analysts and traders said, projecting a less pessimistic outlook for the new year.
The rupee started the year at Rs160.39 in January this year compared to the greenback and closed at Rs178.24 on Wednesday in the interbank market, another historic low, recording a devaluation of over 11 percent or Rs17.85 since January 2021.
The currency appreciated to Rs152.39 against the greenback in May this year but in the latter half of the year higher imports, a Taliban takeover in Afghanistan and negotiations with the International Monetary Fund contributed to the rupee’s downslide, which lost value by around 17 percent or Rs25.85.
“Increasing CAD (current account deficit) due to higher imports coupled with rising international commodity prices and freight charges, uncertainty related to the IMF [loan] program and speculation led to the rupee’s depreciation,” Sana Tawfik, a banking sector analyst at Arif Habib Limited, told Arab News.
Pakistan’s current account deficit widened to a 40-month high at $1.91 billion in November 2021. The July-Nov current account balance turned into a $7 billion deficit as compared to a $1.8 billion surplus recorded last year, according to data released by the central bank.
Five month imports of the country stood at $29.9 billion as compared to exports of $12.3 billion, posting a trade deficit of $17.6 billion.
The higher demand for the greenback for import payments amid increasing global commodity prices, including of petroleum products and food items, kept the Pakistani rupee under pressure while the change of regime in Afghanistan compounded the situation as the flight of the dollar started from Pakistan to Afghanistan.
The Taliban took control of Kabul on August 15, 2021, after US forces withdrew from Afghanistan, leaving behind battered financial institutions. The situation took a turn for the worst after all official accounts of the Afghan government abroad were frozen.
“Afghanistan still depends on Pakistan for its import payments. Every month $300-$400 million worth of Afghanistan’s import are met through Pakistan due to bilateral trade in Pak rupee,” Malik Bostan, chairman of the Exchange Companies Association of Pakistan (ECAP), told Arab News. “Pakistan will be better off if the accounts of Afghanistan are unfrozen because there will be no pressure on Pak rupee.”
But Pakistani currency analysts expect rupee depreciation to slow down following international inflows during the first half of the next year.
“Over the next few quarters our foreign exchange outlook is less pessimistic,” Tawfik, said. “Am expecting the Pak rupee to remain within the range of 178-180 per USD till June 2022 with inflows expected from International Sukuk and IMF tranche followed by flows from ADB and World Bank.”
The south Asian country is expected to see a $6 billion IMF loan program revived at the next meeting of the fund’s executive board on January 12, 2022, which will also ease pressure on the Pakistan rupee.
Pakistan rupee continues slide to historic lows against greenback as 2021 draws to close
https://arab.news/p8fmn
Pakistan rupee continues slide to historic lows against greenback as 2021 draws to close
- Rupee was at Rs160.39 in January compared to greenback and closed at Rs178.24 on Wednesday in interbank market
- Change of regime in Afghanistan compounded the situation as flight of the dollar started to Afghanistan from Pakistan
Return of millions of Afghans from Pakistan and Iran pushes Afghanistan to the brink, UN warns
- Afghan authorities provide care packages for those returning that include food aid, cash, a telephone SIM card and transportation
- But the returns have strained resources in a country struggling with a weak economy, severe drought and two devastating earthquakes
GENEVA: The return of millions of Afghans from neighboring Pakistan and Iran is pushing Afghanistan to the brink, the U.N. refugee agency said on Friday, describing an unprecedented scale of returns.
A total of 5.4 million people have returned to Afghanistan since October 2023, mostly from the two neighboring countries, UNHCR’s Afghanistan representative Arafat Jamal said, speaking to a U.N. briefing in Geneva via video link from Kabul, the Afghan capital.
“This is massive, and the speed and scale of these returns has pushed Afghanistan nearly to the brink,” Jamal said.
Pakistan launched a sweeping crackdown in Oct. 2023 to expel migrants without documents, urging those in the country to leave of their own accord to avoid arrest and forcible deportation and forcibly expelling others. Iran also began a crackdown on migrants at around the same time.
Since then, millions have streamed across the border into Afghanistan, including people who were born in Pakistan decades ago and had built lives and created businesses there.
Last year alone, 2.9 million people returned to Afghanistan, Jamal said, noting it was “the largest number of returns that we have witnessed to any single country.”
Afghanistan’s Taliban rulers have criticized the mass expulsions.
Afghanistan was already struggling with a dire humanitarian situation and a poor human rights record, particularly relating to women and girls, and the massive influx of people amounting to 12% of the population has put the country under severe strain, Jamal said.
Already in just the month and a half since the start of this year, about 150,000 people had returned to Afghanistan, he added.
Afghan authorities provide care packages for those returning that include some food aid, cash, a telephone SIM card and transportation to parts of the country where they might have family. But the returns have strained resources in a country that was already struggling to cope with a weak economy and the effects of a severe drought and two devastating earthquakes.
In November, the U.N. development program said nine out of 10 families in areas of Afghanistan with high rates of return were resorting to what are known as negative coping mechanisms — either skipping meals, falling into debt or selling their belongings to survive.
“We are deeply concerned about the sustainability of these returns,” Jamal said, noting that while 5% of those who return say they will leave Afghanistan again, more than 10% say they know of someone who has already left.
“These decisions, I would underscore, to undertake dangerous journeys, are not driven by a lack of a desire to remain in the country, on the contrary, but the reality that many are unable to rebuild their viable and dignified lives,” he said.
