Pakistani Rupee Loses Value Against The US Dollar As Oil Prices Rise

Against the US dollar, the Pakistani rupee fell by 0.12% in the inter-bank market on Wednesday due to rising oil costs.

The rupee ended the day at 177.62, down 21 paisas or 0.12 percent, according to the State Bank of Pakistan (SBP). On Tuesday, the local currency reversed its downward trend and gained 0.03 percent in value.

As supply disruption apprehensions rose following severe penalties on Russian banks and the increasing Ukraine crisis, traders hurried to find other oil supplies in an already tight market, resulting in the latest fall.

For the first time since June 2014, Brent oil futures hit $113.02 a barrel before dropping back to $111.75.

West Texas Intermediate (WTI) oil futures rose 7.24 cents to $110.67 a barrel, the highest level since August 2013, following prior record highs.

Saad Hashmey, Executive Director at BMA Capital, told Business Recorder that “this is clearly a difficulty for the economy facing a rising current account deficit.”

Despite rising commodity prices, Hashmey voiced worry that Pakistan’s purchase of petroleum products, which now stands at more than $9 billion, might reach $20 billion by the end of FY22. Concerns about how this massive import bill will be paid for are causing market volatility and dampening investor confidence in the money and equity markets.

Global attitude is being influenced by the Ukraine-Russia crisis, according to Zafar Paracha, the General Secretary of Pakistan’s Exchange Companies Association (ECAP). To keep the rupee in a state of uncertainty, Paracha remarked. On the other hand, Paracha warned that Prime Minister Imran Khan’s recently-announced package might increase Pakistan’s import cost even higher.

“Overall, it’s an excellent deal. ” However, this would lead to a rise in machinery purchases, which will raise the import bill even more.” Experts on the condition of anonymity have also expressed worries about the package. Because lower oil prices will lead to increased demand, the current account deficit will rise.

The first seven months of the fiscal year (FY22) have already seen an $11 billion increase in the country’s current account deficit due to an increase in imports.

It is a problem, according to an expert, how the government will manage its external account given the growing commodity costs.