- Pakistan Rupee (PKR) trades over 160.00
- Budget deficit +17% YoY
- US Dollar (USD) moves lower versus major peers
- Vaccine optimism & US fiscal stimulus hope boost risk sentiment
The US Dollar Pakistan Rupee (USD/PKR) exchange rate is extending gains for a third straight session on Wednesday. The pair settled just a few pips higher on Tuesday at 160.04, at the high of the day. At 08:15 UTC, USD/PKR trades +0.2% at 160.42 at the intraday high.
Pakistan’s budget deficit soared to Rs894 billion, equivalent to 2% of the size of the economy in the first four months of the current fiscal year.
Double digit growth in spending, despite a reduction in spending on both defence and development spending meant that the budget deficit ballooned in the July – October period to around 17% more than the same period last year.
Sluggish growth in tax collection of just 4.6% by the Federal Board of Revenue coupled with higher interest rate payments is undermining efforts of fiscal discipline by the Ministry of Finance.
Debt servicing in the July – October period was 34% higher than the previous year.
For the current fiscal year the Federal budget deficit target has been set at 7.5% of GDP.
Meanwhile the US Dollar is dropping lower versus its major peers in risk on trade. The US Dollar Index which measures the greenback versus its major peers trades -0.3% as it hover around 2.5 year lows.
Expectations that the covid vaccine rollout will begin in the coming weeks in the US is lifting the mood in the market. The UK started covid vaccinations on Tuesday and the US is expected to approve Pfizer’s vaccine soon.
Adding to the upbeat mood the US Congress could be approaching an agreement over additional fiscal stimulus with the Democrats and Republicans potentially completing a deal before Christmas. Treasury Secretary Steven Mnuchin has presented a fresh $916 billion relief package to House Speaker Nancy Pelosi.