With reference to a news item headlined "SBP's flexible exchange rate policy: Rupee likely to lose more versus dollar," published in daily Business Recorder on Saturday, January 9, the State Bank has clarified that:
"In your news item it is incorrectly concluded that the Rupee is likely to fall further against the dollar based on the contents of the Letter of Intent (LoI) submitted by Pakistan authorities and subsequently approved by the International Monetary Fund. As before, the current LoI states that Pakistan will "continue to pursue a flexible exchange rate policy to strengthen the external position and maintain competitiveness."
This implies that the exchange rate will continue to be determined by supply-and-demand conditions in the market; and does not suggest any uni-directional movement in the exchange rate or weakening of PKR. However, the exchange rate may continue to depict a healthy volatility trends in the market.
Further, it is pertinent to mention here that microeconomic fundamentals have improved considerably including improvement in trade account. Gross foreign exchange reserves at the end of the first half of FY10 are at a comfortable level of US $15.1 billion with import coverage ratio of approximately 7 months, and reflecting an increase of over US $5 billion on Y-o-Y basis.-PR
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