Rupee gains even as SBP reserves dip to $2.9bn

Foreign exchange reserves held by the State Bank fell by $170 million to $2.916 billion during the week ending on Feb 3, but the rupee gained despite this piece of bad news on Thursday. According to the State Bank, the decline in reserves was due to external debt repayments. Experts believe that the country’s reserves are enough for only 16 or 17 days of imports. The biggest threat is the disconnect in supply of petroleum products, a grim reminder of which is visible in Punjab. The government claims to have petroleum reserves for 20 days. Despite this bleak picture of foreign exchange reserves, the local currency gained significantly against the US dollar. The rupee appreciated by Rs2.82 on Thursday, while it had gained Rs2.95 the previous day. During the last two working days the rupee has appreciated by Rs5.77 against the dollar. Currency dealers said the rupee’s gain had no concrete ground. The gain reflected hopes that negotiations with the IMF would bring good news.