The federal government has decided to base the upcoming fiscal year budget on an exchange rate of Rs. 295 per dollar, according to Finance Ministry sources.
The New Budget
The new rate represents a Rs. 10 increase over the Rs. 285/$ set for the current fiscal year.
While the Finance Division did not explain why the new budget is based on an exchange rate that is Rs. 17 higher than the most recent interbank rate of Rs. 278/$.
Exchange Rate Collapse
It is believed that the government is attempting to keep market wolves in check due to fears of a massive exchange rate collapse in FY2024-25.
The increase in the dollar rate is likely to contribute to headline inflation in the coming fiscal year.
Yet, increased demand for Pakistani goods in the global market is expected to improve foreign exchange earnings.
Investment in Foreign Currency
At this point, the falling value of the Pakistani rupee will affect development investment in foreign currency and petroleum products, as imported items will undoubtedly become more costly.
According to sources, the trade surplus will likely decrease substantially as a result of fewer requests for imports due to their increased cost in FY25.
Cost in FY25
The purpose of determining the dollar rate is to figure out foreign aid, payments, and loans in rupees. However, such an estimate conflicts with Finance Minister Muhammad Aurangzeb’s claim in April 2024 that the PKR was now secure.
According to sources, the market-driven rates will be carried out in accordance with the IMF consensus.
The rising dollar rate worries that external debt, the import bill, and prices of imported food items in local stores will skyrocket.
Budget exchange rate of Rs. 295
The new budget exchange rate of Rs. 295 per dollar may reflect the rupee’s projected worth in the coming months.
However, the new budget figures indicate it could assist officials reach a staff-level agreement with the IMF on a new, much larger rescue very soon.
Aurangzeb stated in March that a deal on a new loan set is expected by the end of the current fiscal year (June 30).
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