Pakistan's currency opened 2022 on a weaker note, depreciating 0.14% against the US dollar in the inter-bank market on Tuesday.

As per the State Bank of Pakistan (SBP), the PKR closed at 176.75 against the USD after a day-on-day depreciation of 24 paisas or 0.14%. Last week on Wednesday, the PKR had closed at its all-time record low of 178.24 against the USD before appreciating the following two days to end the year at 176.51.

Read about the rupee's performance in 2021

The depreciation on Tuesday comes as Pakistan’s trade deficit touched $25 billion during the first half (July-December) of fiscal year 2021-22 as compared to $12.363 billion in the corresponding period of 2020-21.

According to initial foreign trade figures, total imports stood at $39.912 billion during first six months of FY 2021-22 whereas exports were $15.125 billion, showing a difference of almost $25 billion.

The widening trade deficit has added pressure on the rupee with the weaker currency also contributing to inflation that clocked in at 12.5% in December 2021, nearly a two-year high.

Meanwhile, the Pakistan Business Council (PBC) in its latest note expressed concern over the rise in inflation in the coming months.

Against USD: Pakistan's rupee ends 2021 with back-to-back gains

“Inflation will continue to rise for the next few months, as GST increases,” said the PBC. “The SBP will continue to address this with a ‘wide broom’ of general policy rate increases, without sufficient differentiation between cost-push and demand-pull inflation.”

The PBC further added that the decline in international crude price could offer some respite in the trade deficit, “though ominously, JP Morgan forecasts $125/barrel. Regional conflicts, under-investment in global oil production, as well as benign Covid variants could make high oil cost a reality”.

Earlier, Business Recorder reported that Exchange Companies have asked the SBP to restrict banks from forward booking of dollars for import purposes to stabilise the exchange rate.

Import purposes: ECs ask SBP to restrict banks from $ forward booking

A few months ago, banks sold a lot of dollars to importers on forward booking and the SBP provided about $2.5 billion to banks to meet their requirements, said Malik Bostan, Chairman, Exchange Companies Association of Pakistan (ECAP).

He added that ECAP has also proposed trade with Afghanistan in Pak rupee, a measure aimed at stabilising the currency.

Inter-bank market rates for dollar on Tuesday

BID Rs 176.55

OFFER Rs 176.65

Open-market movement

In the open market, the PKR gained 50 paisas for buying while remaining unchanged for selling against USD, closing at 178 and 179, respectively.

Against Euro, the PKR remained unchanged for buying while gaining 50 paisas for selling,, closing at 199 and 200.50, respectively.

Against UAE Dirham, the PKR lost 21 paisas for buying and 25 paisas for selling, closing at 49.51 and 50, respectively.

Against Saudi Riyal, the PKR lost 20 paisas for both buying and selling, closing at 46.55 and 47, respectively.

Open-market rates for dollar on Tuesday

BID Rs 178

OFFER Rs 179