KARACHI: After three days of stability in the exchange rate,
importers released their products in the market that they had been
holding back for a week.
The dollar was traded in the range of Rs110.20-110.50 in the interbank market during the last session on Friday.
The
rupee started losing value against the dollar on Dec 8. It lost about
4.7 per cent during the week.
Currency dealers said the State Bank of Pakistan (SBP) used its
influence to bring imported dollars in the open market. Some dealers
export currencies other than the greenback to Dubai and bring back
dollars instead. However, these importers withheld their imported stocks
in the wake of rising dollar prices.
“The dollar is
easily available in the open market. Its demand on Friday was not more
than 50pc of what it was two days back,” said Mailk Bostan, president of
the Forex Association of Pakistan.
He said half of the
dollar amount in the open market is being deposited in banks by currency
dealers, which indicates low demand. The depreciation hurt importers
who said prices of imported products inflated after the 5pc loss in the
value of the local currency.
“We have to make payments at
the rate on the day that the imported products land in the country.
Landed costs automatically increased, but we cannot pass on the hike to
retailers with immediate effect,” said Anis Majeed, an importer of
pulses.
Wholesalers who had paid before the depreciation took place had the opportunity to earn an additional 5pc on their imports.
“I
don’t believe the costlier dollar will cut imports. People will buy
same products at 5pc higher rate,” he said, adding that exporters could
benefit in the short run as buyers would adjust price differences due to
the change in the exchange rate.
Ever-increasing imports
have created a serious problem for the country’s external sector. The
trade deficit increased more than export proceeds, producing a large
current account deficit. The International Monetary Fund and other
economic institutions recently criticised the growing current account
deficit.
Exporters welcomed the depreciation. But a
number of economists questioned the extent of the likely increase in
exports and decrease in imports as a direct result of the depreciation.
Bankers
like the National Bank’s president recently wondered aloud about “other
options” if exports failed to boost following the depreciation. More
depreciation is not an option, he said, adding that other problems
afflicting the export sector must be addressed.
