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Rupee Strengthens Against Dollar As Dar Takes Over Finance Ministry

  • The rupee continues to rise versus the dollar.
  • The rupee gains 1.91 and trades at 232 to the dollar.
  • Analysts attribute the increase to Dar’s return home.

The dollar’s drop accelerated when federal minister Senator Ishaq Dar took over the finance ministry on Wednesday, and the Pakistani rupee climbed for the fourth session in a row.

The rupee rose 1.91 percent to 232 per dollar in intraday activity on the interbank market, following a 7.65 percent gain the previous week.

The return to Pakistan of PML-N supremo Nawaz Sharif’s close aide Dar to resume the role of finance minister has allegedly helped build confidence, and the decrease in global commodity prices has also been cited with helping the rupee improve.

Fortunately, falling international commodity prices and administrative steps by the government will likely keep the current account deficit under control.

According to The News, inflation has likely peaked and will begin to fall in the coming months.

In an interview with Geo.tv, Dr. Khaqan Hassan Najeeb, an economist and former consultant to the federal ministry of finance, claimed that the first issue is a shift in market mindset caused by a change in leadership at the finance ministry.

Aur Sunao - Rupee Strengthens Against Dollar As Dar Takes Over Finance Ministry
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According to the former consultant, the new management is more cognizant of rupee volatility and hence more bent toward orderly advancement.

Second, he noted that some fundamentals had improved, especially the decline in oil and other key commodity prices, which may help to reduce import volume.

Finally, Dr. Najeeb stated that the declaration by multilateral lenders to provide disaster relief is a market-stimulating event.

Finally, Najeeb stated that, while it may appear unrealistic, the International Monetary Fund (IMF) may change its approach and be more merciful in some cases as a result of the floods.

According to Alfalah’s head of research, Fahad Irfan, Dar would not have the same amount of independence as he did during his previous term.

The IMF has usually tightened policy implementation. He noted that the fact that Pakistan now has a free exchange rate system is critical, since otherwise the country would have record-low foreign exchange reserves and limited room to utilize them to manage the exchange rate.

Irfan stated that administrative limits and stricter controls on money laundering and smuggling out of Pakistan are still possible.

He stated that the rupee was expected to recover some lost ground. However, due to Dar’s anxiety, the rate of appreciation has accelerated.

He noticed that in times of catastrophic floods and an extremely vulnerable economic situation, changes in senior positions may benefit Dar in recovering some lost popularity, but this may slow down decisions.

Dar kept the rupee at a parity of 100 to the dollar throughout the entire of his term (2013-2017), and he kept the policy rate at a record-low level of 5.75% from May 2016 to December 2017.

According to Irfan, this lethal mix was the primary reason for Pakistan’s unprecedented high current account deficit of $19.2 billion, or 6.3% of GDP, in FY2018, as well as the depletion of foreign exchange reserves to just two months’ worth of import coverage.

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