Strengthening your currency is not a difficult proposition; you only have to cut down on dollars’ outflow and increase the inflow. Outflow can be curtailed through controlled imports or if and when the prices of major import commodity i.e. crude oil face southward. Increase in inflows can be achieved through increase in export items like textile products but that seems a far cry due to scarcity of electricity. There are other factors; like foreign investment in stocks etc but that is possible only if the political stability, as per investors’ perception is achieved.
In spite of dooms day scenario painted by prophets of doom, there are certain developments here and there that give you some reason to feel a bit of relief. Bloomberg Businessweek has recently reported that Pakistan’s rupee was headed for a weekly gain as stock inflows picked up and a drop in crude oil prices helped reduce the nation’s import bill.
The currency strengthened on each of the five days, its longest winning streak since April 2009, and overseas investors pumped a net $14.6 million into Pakistani shares in the first three days of this week, exceeding weekly tallies for the past two months. Pakistan imports 80 percent of the oil it uses and the cost of crude was $76.56 a barrel in recent trading, 0.8 percent less than at the end of last week.
“The reduced demand for dollars from oil importers helped the currency to strengthen,” said Mustafa Pasha, assistant vice president and economist at BMA Capital Management Ltd. in Karachi. “The rupee will remain under pressure as importers will need as much as $600 million to import oil next week.”
The rupee traded at 85.281 per dollar as of 9:35 a.m. in Karachi, 0.3 percent stronger than at the end of last week, according to data compiled by Bloomberg.
The central bank said yesterday its foreign-exchange reserves as of June 18 were $12 billion, up from $11.9 billion on June 11.