- Currency loses 0.12% as market factors in declining SBP reserves
After a day’s breather, rupee again recorded a loss against the US dollar on Friday as the market panicked over dip in the State Bank of Pakistan (SBP) foreign exchange reserves.
On Thursday, data from the central bank revealed that foreign exchange reserves held by SBP decreased by a massive $748 million on a weekly basis, falling to a critical $8.24 billion amid expectations that the recently-signed agreement with Chinese banks would help boost the level. The dip came due to external debt repayment.
Resultantly, the rupee closed with a loss of 25 paisa or 0.12% to close at Rs207.48 against the greenback.
Total liquid foreign reserves held by the country stood at $14.21 billion as of June 17, 2022 with net foreign reserves held by commercial banks clocking in at $5.97 billion.
On Thursday, the local currency ended its nine-session depreciation run against the US dollar in the inter-bank market and gained over 2.2% as the currency market celebrated the announcement of a loan agreement with Chinese banks as well as progress on budget measures with the International Monetary Fund (IMF).
Speaking to Business Recorder, Pak-Kuwait Investment Company Head of Research Samiullah Tariq said that the marginal dip in currency was witnessed on account of persistently falling foreign exchange reserves.
However, he added that the sentiment in the currency market is broadly stable because funds would be diverted to it from the equity market following the imposition of super tax on large industries.
“Fixed income markets will see stable or marginally positive sentiment following the imposition of super tax because money will flow from equity segment to fixed income securities,” he said.
On Friday morning, Prime Minister Shehbaz Sharif announced a one-time poverty alleviation tax or super tax on large-scale industries in the "bid to relieve the general public of tax pressures".
“The collection from this tax will be used to alleviate poverty in Pakistan and will be funded by the high income earners,” he said after a meeting with the government’s economic team.
The tax will be applicable on cement, steel, sugar, oil and gas, fertiliser, LNG, textile, banks, automobile, beverages, chemicals and tobacco sectors. Later, finance minister Miftah Ismail also mentioned airlines as among those included in the list, taking the total of 13 sectors.
“These 13 industries made huge profits last year and hence, they were identified by the government for super tax,” he said.
Taking to twitter, he clarified that the super tax of 4% will be applicable to all sectors.
“For the specified 13 sectors, another 6% will be added for a total of 10%,” he said. “So their tax rates will go from 29% to 39%. This is a one-time tax needed to curtail the previous four record budget deficits.”
Inter-bank market rates for dollar on Friday
BID Rs 207.50
OFFER Rs 207.70
In the open market, the PKR remained unchanged for both buying and selling against USD, closing at 207 and 209, respectively.
Against Euro, the PKR remained unchanged for both buying and selling, closing at 217 and 219, respectively.
Against UAE Dirham, the PKR gained 70 paisas for both buying and selling, closing at 55.80 and 56.30, respectively.
Against Saudi Riyal, the PKR gained 40 paisas for both buying and selling, closing at 54.80 and 55.30, respectively.
Open-market rates for dollar on Friday
BID Rs 207
OFFER Rs 209