Pak rupee plunges below 32 against dirham

Analysts believe rupee could hit 33 against the dirham.

The Pakistani rupee on Monday plunged below 32 against the UAE dirham as the country's central bank did not intervene to arrest the slide in the currency, which is believed to be orchestrated to encourage more forex inflow into the country.
The rupee, which hit a low of 32.25 on Monday, came under pressure due to a balance of payment (BoP) crisis amid shortage of dollars in the market and decline in foreign exchange reserves.
This is the third devaluation of Pak rupee in the last 7 months. The currency was earlier devalued by 5 per cent both in December 2017 and March 2018.
Industry analysts believe that the currency will remain under pressure due to balance of payments problem and could hit 33 before a new elected government comes into power after the July 25 elections.
Promoth Manghat, CEO, UAE Exchange, said the recent devaluation of the Pak rupee is a move that aligns it with the prevailing economic fundamentals.
"The country's macro-economic conditions also impacted the currency adversely," Manghat told Khaleej Times.
For Pakistani expatriates, he said there is the advantage of an increased value that this move provides for their earnings abroad.
"The government has been taking significant steps towards promoting financial inclusion by encouraging inbound remittances and digitisation of financial services. The M-wallet initiative by the government is a step in this regard. With these developments, we are likely to see a greater shift of remittances to official channels," Manghat said.
Sudhesh Giriyan, chief operating officer, Xpress Money, said it is an orchestrated devaluation move by the government because under normal circumstances, "you don't see such large depreciation". The rupee today went past the 32 mark against the UAE dirham and it looks like it will go down further, he said.
"We had predicted it will go beyond the current level because balance of payment had worsened and oil prices are high, hence, the country is struggling for dollars," he said, adding that when devaluation happens, expats send more money home.
Rajiv Raipancholia, CEO, Orient Exchange, believes that since a caretaker government is currently in place in Pakistan ahead of general elections in July, it cannot take any policy decision and the foreign exchange reserves of the country have already gone down drastically.
"Since there is no effective government mechanism for the next 2 months, the rupee started to depreciate against the US dollar. On Monday morning, the rupee fell to a low of 32.25 against the dirham as against 31.46 closing on Sunday. If the trend continues, the PKR can hit 33.2 against the dirham also before a new elected government comes into power," he added.
Raipancholia had earlier forecasted in May that the rupee could hit 38 against the dirham by 2020.
The State Bank of Pakistan on Monday said remittances from overseas Pakistanis reached $18 billion in the first 11 months of 2018-19 financial year, showing an increase of nearly 3 per cent.
Xpress Money's Giriyan predicted that more dollars will be flowing into the country due to the planned devaluation by the government and expats look at this as an opportunity to send more money which will ease the pressure for dollar shortage.
"The holy month of Ramadan sees a double-digit growth in remittances. As you get closer to Eid holidays, there is a real surge in remittances. The maximum surge in remittances is witnessed during 3-4 days prior to Eid when they jump more than 20 per cent on a month-on-month basis," Giriyan added.
- waheedabbas@khaleejtimes.com