Dollar falls by Rs5.86 as China grants $2bn loan to Pakistan half of which already sent

ISLAMABAD: The value of the dollar against the rupee in the interbank market went down by Rs5.86 as China granted a $2-billion loan to Pakistan.
Pakistan has received $1 billion from China. The remaining $1 billion is expected in the coming week. This has brought the value of dollar down from Rs127.86 to Rs122.
According to sources in the finance ministry, the State Bank has received $1 billion from China. As of July 26, the State Bank had $9.1 billion while commercial banks had over $6 billion. The total of the country’s foreign reserves is $15.72 billion, said State Bank officials. On August 2, the foreign reserves of the State Bank will go up by $1 billion as China’s loan will be added.
The dollar rose to Rs128 in the interbank market on July 16, a 5.3% increase from July 13 when it was trading at Rs121.46. On July 17, the value of the dollar rose to Rs128.40 as the value of rupee fell by another 40 paisas against the US dollar.
In January, the dollar was trading at Rs110.7 against one rupee but has since increased 15.6%, reaching an all-time high of Rs128 on July 16 due to pressures on the country’s external front. Pakistan’s trade gap has widened to $37 billion as imports are 2.5 times higher than exports.
This means we are consuming more imported items. This is not sustainable in the long term and leaves the country with fewer dollar reserves to pay for productive imports like machinery and petroleum that support economic activity. A stronger dollar would discourage imports of non-essential items and help stop the dollar drain.
Agencies add: In a first in four years, the US dollar shed Rs5.36 against the rupee on Monday in the inter-bank market, falling to Rs122.5.
In the open market, the foreign currency fell by Rs2, to trade at Rs118 (buying) and between Rs120-122 (selling).
According to reports, the dollar is likely to further depreciate later in the day as some exchange companies are yet to start trading.
As the markets opened, the Pakistan Stock Exchange (PSX) also witnessed a positive trend. The benchmark KSE-100 index gained 314 points to reach 43,100 points.
The positive economic indicators are considered to be largely driven by what investors consider the return of political stability following the July 25 polls.
The national debt will decline by Rs450 billion as the rupee consolidates gains against the greenback.
Talking to media, market analyst Samiullah Tariq said, “News of inflows from multiple channels including the credit line from the Islamic Development Bank (IDB) has created a positive sentiment about the balance of payments. This has resulted in a drop in dollar price in the interbank market against the rupee.”
As the future outlook becomes clear and investors gain confidence about the outcome of their future investments, the market will continue to incorporate the positive sentiment in trading activities, Tariq said.
On Saturday, the US dollar had depreciated by Rs4 in the open market. The positive development was attributed to the end of political uncertainty following elections.
In the past week, the greenback’s price had soared as high as Rs130 as Pakistan moved to its second democratic shift of power amid security threats and terrorist attacks in different parts of the country.
Pakistan’s economic fundamentals had deteriorated ahead of the July 25 general election. Since December, the rupee had cumulatively shed over 21% of its value after the State Bank of Pakistan reportedly abstained from intervening in response to the pressure exerted by a widening current account deficit.
Meanwhile, Islamabad Chamber of Small Traders on Monday said PTI has reversed the trend of dollarization of the economy before taking control of the government which is highly laudable.
The retreat of US dollar and strengthening rupee indicate confidence of masses and business community in the incoming Prime Minister Imran Khan and his team, it said.
The fall of the dollar can be attributed to the high expectations of the business community, bright outlook, stability of the market, and highly improved political environment, said Patron Islamabad Chamber of Small Traders Shahid Rasheed Butt.
He said that continued appreciation of rupee will reduce foreign debt by tens of billions of rupees, reduce prices of many necessities at home and send a very positive signal to the international community

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