US Dollar (USD) crashed by more than 700 pips against the Pakistani Rupee (PKR) during the last eight days hence dragging USD/PKR from 105 to 97.70, the lowest level in about nine months. Pakistan’s Finance Minister said he expects further appreciation in the Rupee against the greenback amid better growth outlook and improving foreign reserves.
Increasing Foreign Reserves
Pakistan attracted more than $106.00 million Foreign Direct Investment (FDI) during the first month of 2014 while the FDI during the last seven months was amounted to over $500 million, according to the latest statistics released by the State Bank of Pakistan (SBP). In addition, the country expects $550 million loan from the International Monetary Fund (IMF) and about $500 million through the launch of Eurobonds as soon as the next month.
Moreover, remittances from the overseas Pakistanis also jumped by 11% last year. The overseas Pakistanis sent around $10.24 billion during the past eight months as compared to $9.23 billion remittances during the same duration of the year before, the Finance Minister Dr. Ishaq Dar said today. Dar also revealed that the country witnessed around 17.7% increase in tax collection since the start of the fiscal year in July 1.
Assistance from “Friendly Nation”
Pakistan last week received $750 million in the newly established Pakistan Development Fund (PDF) from a country which was termed as a “Muslim Friendly Nation” by the Finance Minister. The minister neither revealed the identity of the country nor told the nature of the receipt i.e. if it was a donation or loan. With the recent transaction, the total receipts in PDF have exceeded $1.5 billion in just one month. According to some commentators, Pakistan received the $750 million receipt from Saudi Arabia.
Better than Expected Growth
Pakistan grew at five percent in the first quarter of the ongoing fiscal year as compared to just 2.9 percent growth in the same duration of the year before, according to the quarterly growth report released by the SBP on February 28. The fiscal deficit also dropped to 1.1% of the GDP during the first quarter as compared to 1.2% in the corresponding quarter of the year before, the SBP data showed.
Peace Talks & Political Stability
Investors felt comfort after the recent peace dialogue between the government and the Taliban. Almost all the political parties unanimously supported the government over the dialogue. Similarly, the political stability and considerable economic progress made by the new government in less than one-year duration is also a reason for the appreciation in the rupee.
So keeping in view the constantly increasing foreign reserves, rapid increase in the economic growth and favorable comments from IMF, the rupee is expected to continue the ongoing appreciation against the greenback which will consequently help the country to cope with the high inflation rate.
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