The Pakistani rupee on Monday traded near all-time lows against the UAE dirham on Monday morning after terrorists attacked the Pakistan Stock Exchange (PSX), however the currency recovered in late session on budget approval and news about fresh fund inflows in July.
The PSX also shrugged off the terrorist attack and focused on the tax-free budget approval for 2020-21 by parliament on Monday. The KSE-100 Index slumped 207 points in the morning after the terrorist attack but recovered losses and ended 0.71 per cent, or 242.3 points, higher at 34,181.8 points.
The rupee recovered as the situation around the PSX was brought under control by the law enforcement agencies. The rupee fell 0.3 per cent from 45.58 to as low as 45.72 but later recovered to 45.63. The currency had hit al-time low of 45.82 on March 29, 2020. It has lost 8.1 per cent year-to-date against the dirham and the US dollar.
Four terrorists attacked Pakistan Stock Exchange building causing death of nine people including four attackers.
Traders said a major disaster was averted by the timely action of security forces as well as fewer people were present in the stock exchange building due to lockdown and remote working policy by the offices.
"Thank God, the damage has been controlled. There could've been many more casualties due to high number of people inside the building," said Samiullah Tariq," head of Research & Development at Pakistan Kuwait Investment Company.
Tariq sees pressure on rupee will ease off after June 30 as more foreign fund inflows are expected as fiscal year concludes on June 30. However, as inflation differential exists, the currency can reach 46.32 against the dirham (170 versus the US dollar) by December 2020, he added.
On Monday, Pakistani parliament approved Rs7,294.9 billion federal budget for fiscal year 2020-21 with zero new taxes. The new budget is 11 per cent smaller than the previous year.
"It was a difficult budget but still government fared well and didn't impose any new taxes on the public and businesses. In fact, sales tax has been reduced which will benefit the market. The government needs to focus on loss-making state-owned mega companies which are a major burden on public exchequer and eating into the development funds," said Syed Qaiser Anis, President of Pakistan Business Professional Council Abu Dhabi.
He also called for bringing balance between imports and exports which will also help reduce pressure on the currency and improve balance of payment.
"Previously, government paid off all the expensive loans in early 2000 which released pressure on the government. This government should also take a similar approach."
He also urged broadening the country's tax net with the help of technology to ensure majority of the wealthy are brought into the tax system.
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