Pakistani analysts and brokerage houses predict that the rupee-dollar parity will be between Rs 160-166 in 2021. The President of the Forex Association in Pakistan says that the rupee will appreciate against the greenback following a rise in remittances, a decline in import bills and new strategies of the State Bank of Pakistan (SBP) to fetch foreign dollars through Roshan Digital Accounts (RDA) in Pakistan.
Chairman Forex Association, Malik Bostan said, “We are seeing the dollar at Rs 155, if the situation remains stable in the first half of the calendar year 2021. Policies of this government have changed a little and it wants to boost the country’s economy.”
He said that the foreign reserves of Pakistan were at $20.5 billion by the end of this year, while remittances had touched around $25 billion this year. Next year, the government would try to touch $28-$30 billion remittances. Around 14,000 digital accounts had been opened in the last four months and people deposited $140-150 million in their accounts which is rising day by day.
Analysts also forecasted the rupee will remain between Rs 161 and Rs 166 against the US dollar in the coming year, taking cue vividly now from market forces. This means imported inflation and COVID management will guide its direction.
“In my view, the currency should depreciate as per historic inflation differential, which should be approximately 3-4%, meaning it should trade around 165-166 by December 2021,” said the head of research at Pak-Kuwait Investment Company Samiullah Tariq.
“Upside risks are improvement in financial inflows and privatisation, while downside risks are major rally in oil and other commodity prices,” Tariq added
Taurus Securities said the rupee has adjusted its value by 60% after being artificially overvalued since 2017 due to the market-based mechanism placed in the country as desired by the IMF in 2018. The company, in a report, said that the rupee now clearly trades according to market forces and can be seen in the interbank and Kerb market rates.
“Since December 2018 the rupee’s real-effective exchange rate has remained under 100, indicating that it is fairly valued compared to other benchmark currencies,” said the analyst.
The analyst predicted that the rupee will adjust during the second half of 2021 due to a rising import bill because of an uptick in oil prices as well as imports for the domestic industrial sector. Similarly, as Covid-19 vaccines start circulating and lockdowns ease, it expects global benchmark currencies to strengthen against the rupee.
“Overall, we expect an average parity of PKR 164.7/USD for FY21,” it said. The fate of the currency depends on vaccine rollouts as it would help the domestic economy, as well as global economies, to shake off the pandemic grip soon.
Where the rupee/dollar parity goes in 2021 depends more on the country’s import bill, the international oil prices, external debt repayments, financial inflows, and the resumption of the $ 6 billion worth International Monetary Fund’s extended fund facility for Pakistan, analysts said.
Higher oil prices in 2021 are expected to affect the import bill and swing the current account back to a small deficit. For 2021, the current account deficit seems to be below 2% of the GDP.
On Thursday afternoon, the currency was quoted closing at 159.75 against the greenback. Overall, the rupee has depreciated by 3.50 percent in 2020. In the open market trade, the rupee has fallen by 3.38% in the outgoing year. Between October and November, the rupee had secured the third best-performing position in Asia after Indonesian Rupiah and South Korea Won, the analyst claimed.
