(MENAFN- Khaleej Times) The Pakistani rupee has witnessed volatility in the past week, losing as much as four per cent of its value as the State Bank of Pakistan allowed the currency to depreciate in a controlled manner.
Though it increased inflationary pressure in the country, at the same time, it has also given an immense opportunity for overseas Pakistanis to cash in on the declining value of their currency by remitting more. The UAE Central Bank's data for the third quarter of 2017 showed that the UAE-based Pakistanis remitted more year on year.
With the rupee touching a record low, industry executives believe that it's high time for Pakistanis to remit funds now. However, they also forecast further depreciation of the rupee but that may not be as steep as it was witnessed during the last week.
"Now is a good time for Pakistani expats to start sending money home, it will fetch more rupees per dirham. We expect the depreciation to continue for some more time, but the pace could be slower. And also irrespective of the currency rate, expatriates need to send money home for family's maintenance. Hence they should take advantage and remit more," says Promoth Manghat, CEO of UAE Exchange.
The rupee turned volatile after news reports that Pakistan's central bank would allow rupee devaluation in a sustained manner. On December 11, the rupee suddenly declined from 28.8 against the dirham to 29.25 in a single day. It plunged further and closed at 29.90 on the weekend.
Adeeb Ahamed, managing director, Lulu Exchange, noted that the rupee slid gradually from 105 to 110 against the US dollar during the week.
"I think the rupee might move around 6-7 per cent, allowing it to reach a high of 112 level against dollar. The authorities in Pakistan are doing all that they can to plug the illegal money transfer setup. Alongside this devaluation, Pakistan government might resort to some regulatory steps to plug 'hawala' route, as they cannot condone directions from international regulatory bodies."
Rupee may slide further
In respect of remittances, Ahamed said the volume has not gone up on account of the recent rupee slide.
"Pakistani residents might be waiting for the rupee to hit 111-112 against the US dollar, as it has tested 110 on Thursday. In the event of further slide from here, the high value tickets might go up and we expect some spurt in remittances."
There are approximately 1.3 million Pakistanis residing in the UAE, contributing 8.7 per cent - or Dh3.76 billion - of Dh43.3 billion remittances during Q3 2017. According to the official figures, the UAE and other Gulf countries make up over 60 per cent of the country's $19.3 billion remittances during last fiscal year. The country aims to increased remittances to $30 billion by introducing a host of measures including more benefits for recipients and opening a mandatory bank account for overseas Pakistani in the country.
Considering political situation in the country, Rajiv Raipancholia, CEO, Orient Exchange, predicts further depreciation in the rupee over the next couple of weeks.
"Pakistan rupee has depreciated nearly four per cent within a week. We have witnessed a sudden growth in remittances to Pakistan as expatriates want to take advantage of the favourable rate. Currently, compared to the past few weeks, the rupee has depreciated significantly and there is a surge in the remittances. But at the same time we see some speculation among customers that it will go down even further," adds Raipancholia.
Imadul Malik, general manager, Al Ghurair International Exchange, says overseas Pakistani should remit more funds as rupee has depreciated to the lowest in most recent times.
"Yes, this is the right time to send money as going forward State Bank of Pakistan may intervene and make the rupee stable if not then there will be further deficit in balance of payments," Malik said.
He attributed currently volatility in the rupee to imbalanced imports and exports.
Malik said factors which will drive rupee will be trade, inflation, employment, interest rates, growth rate and geopolitical conditions.
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