Pakistan Currency against the US dollar has remained volatile since the beginning of the financial year 2012 mainly due to strained relationship between Pak-US and liquidity shortages.
The situation is expected to remain precarious in later part of the year as the global economic outlook is unlikely to get revitalized and could drive further deterioration on the external front.
The sluggish growth in exports, due to weaker commodity prices and severe energy crisis in the country, is also playing its role in currency deterioration. Furthermore, the slow demand of Pakistani products in other countries due to weak global economic growth also aggravated the ailing situation.
The persistent rise in import bill put immense pressure on the current account deficit of the country, especially with resurge in oil prices lately. The massive increase in the consumption of oil products due to gas outages resulted in widening of trade deficit and increasing the burden of oil import bill on the economy.
Foreign portfolio investment has also dried up and foreign institutional investors had been net sellers consistently during last two months on most trading days. The trust deficit shown by foreign investors has also affected the sentiments of local investors as well who are also active in making their capitals fly to other regions.
The massive pressure on the foreign reserves is yet to come in the form of repayments of outstanding loans in the second half of the fiscal year, which could further deteriorate on the already weakening position of the rupee.
Moreover, the strained relationship with the United States after the recent NATO attack on Pakistani soldiers could also halt the flow of money coming in the economy in the form of Coalition Support Fund.
The only area which has supported the Pakistan currency has been the remittances sent by overseas Pakistani employed abroad. But, this could also suffer particularly after the weaker global economic outlook and massive increase in unemployment rate of major economic powers of the world.
It is hoped that current relaxation in policy rate by the central bank could provide necessary impetus to the export oriented industries, but they require support from supply side too to remain competitive.
The situation is expected to remain precarious in later part of the year as the global economic outlook is unlikely to get revitalized and could drive further deterioration on the external front.
The sluggish growth in exports, due to weaker commodity prices and severe energy crisis in the country, is also playing its role in currency deterioration. Furthermore, the slow demand of Pakistani products in other countries due to weak global economic growth also aggravated the ailing situation.
The persistent rise in import bill put immense pressure on the current account deficit of the country, especially with resurge in oil prices lately. The massive increase in the consumption of oil products due to gas outages resulted in widening of trade deficit and increasing the burden of oil import bill on the economy.
Foreign portfolio investment has also dried up and foreign institutional investors had been net sellers consistently during last two months on most trading days. The trust deficit shown by foreign investors has also affected the sentiments of local investors as well who are also active in making their capitals fly to other regions.
The massive pressure on the foreign reserves is yet to come in the form of repayments of outstanding loans in the second half of the fiscal year, which could further deteriorate on the already weakening position of the rupee.
Moreover, the strained relationship with the United States after the recent NATO attack on Pakistani soldiers could also halt the flow of money coming in the economy in the form of Coalition Support Fund.
The only area which has supported the Pakistan currency has been the remittances sent by overseas Pakistani employed abroad. But, this could also suffer particularly after the weaker global economic outlook and massive increase in unemployment rate of major economic powers of the world.
It is hoped that current relaxation in policy rate by the central bank could provide necessary impetus to the export oriented industries, but they require support from supply side too to remain competitive.
http://www.halaltamweel.com/2011/12/24/News/Pakistani-Currency--Dark-clouds-still-exist/2845/Story.aspx
No comments:
Post a Comment