Pakistani Rupee decline may continue further

Pakistani Rupee decline may continue further

KARACHI: Rupee is expected to further depreciate around percent by the end of the next fiscal year of 2019 as external financing requirements are projected to remain elevated in the medium-term on growing imports, a brokerage said on Wednesday.

“We expect a further depreciation of around 5 percent in rupee/dollar value by the second half of 2018 followed by approximately 5 to 7 percent devaluation during 2018/19,” Alfalah Securities said in an economic brief. “We expect further market-driven downward adjustment of the exchange rate in response to depletion of forex reserves, with the magnitude and duration of rupee weakness depending on when Pakistan signs up to a (International Monetary) Fund program – or manages to arrange foreign exchange reserves- bolstering hard currency from alternate sources.”

Rupee lost 10 percent of its value against dollar since December 2017.

The brokerage said the country’s external financing requirements would increase in the medium-term as large energy import requirements displace China-Pakistan Economic Corridor -related machinery imports, and as “a hump in debt repayments kick in”.

“The gross external financing requirement is on target to be around $25 billion for the full year,” it added. “The unfunded portion of the overall external gap is estimated to be around $12 billion for the current fiscal year, which could represent a drawdown of official reserves if it remains unfinanced.”