Pakistan’s widening trade balance has put the Rupee under immense pressureas energy and commodity prices continue to surge, reported Bloomberglink.
Since Pakistan meets most of its fuel needs through imports, energy costssoared to $13 billion during July-February 2021-22, more than double thereceipt in the corresponding period last year. The costs might further goup since oil prices have risen past $100 per barrel in response to supplyissues in the wake of Russia’s invasion of Ukraine.
Talking to Bloomberg, Chief Country Officer Deutsche Bank AG, Syed KamranZaidi, said, “That’s a key concern for the economy and for the businesscommunity. That is obviously something which the banks are also cautiousabout.”
As per SBP figures, Pakistan’s current account deficit was $545 million inFebruary, which was less than the $2.5 billion record loss in January butover 16 times larger than the same month last year.
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Zaidi noted that a weaker rupee might be one of the factors which putpressure on SBP to elevate borrowing costs, and the benchmark target ratecould rise by 50-100 basis points during upcoming Monetary Policy Committeemeetings after being kept unchanged in the past two cycles. “The market hasalready incorporated this change as can be seen by secondary market yieldsof Treasury Bills and Pakistan Investment Bonds” that reflect short- andlong-tenor instruments,” he added.
In terms of his long-term projections for Pakistan, Zaidi remarked that thecountry would be in “good shape” mainly because of increased exports. Hesaid that many global corporations were enthusiastic about the country,with a few ranking Pakistan among their top five locations. At least two ofthose businesses are developing new plants in Pakistan, he added.
