“IMF Deal Spurs Pakistani Rupee to Surge Rs 11 Against US Dollar”
The Pakistani rupee experienced a notable rebound in the currency market following a last-minute agreement with the International Monetary Fund (IMF), based in Washington. At the close of Tuesday’s trading, the rupee showed a significant increase of Rs 11, marking a 3.62 percent rise against the US dollar. In contrast, the Pakistan Stock Exchange witnessed a downward trend, losing 341 points and closing at 43,557 points after a substantial surge on Monday.
Despite the stock market’s decline, the rupee demonstrated a remarkable recovery in the currency market due to the IMF deal. During the morning session, the rupee had already gained Rs 15 in the intrabank market, but by the end of the trading day, it confirmed a recovery of Rs 10 and was trading at Rs 275-276 in the intrabank. The Forex Association of Pakistan reported that the dollar had initially traded around Rs 271 in the interbank but eventually settled down.
Financial experts attributed the rupee’s gains and stock appreciation to the approval of funding by the IMF, although they emphasized the need to closely monitor market conditions throughout the week. The Finance Minister, Ishaq Dar, had hinted at the rupee’s potential gain when the banks opened in the morning, which turned out to be accurate. The banking sector and markets had been closed for Eid Holidays from Wednesday to Sunday when the government announced the IMF deal. Additionally, banks were closed on Monday for clearing.
Analysts speculated that the dollar might stabilize around the Rs 275 range in the domestic market, with an expected range of Rs 280-285 in the open market. This viewpoint was supported by the President of the Forex Association, Zafar Bostan. Khurram Shehzad, CEO of Alpha Beta Core, attributed the decline in the dollar to the approval of the stand-by agreement with the IMF. He anticipated that individuals hoarding dollars would sell them in the market after the Rs 15 decline, potentially leading to an increase in the country’s foreign exchange reserves. Furthermore, Shehzad predicted a rise in remittances through official banking channels due to reduced reliance on informal money transfer methods like hundi-hawala.
In the open market, the Pakistani currency also witnessed a surge of Rs 10, reaching Rs 285 against the US dollar in the morning. On Friday, Pakistan signed a staff-level agreement with the IMF for a new nine-month loan program of USD 3 billion. Financial experts anticipated that the first tranche of USD 1-1.25 billion from the IMF would arrive in July, and additional loan inflows from other multilateral creditors and friendly countries, totaling around USD 1.5-2 billion, would help rebuild foreign exchange reserves and support the rupee against the US dollar.
Despite the recovery, Pakistan’s foreign exchange reserves remained critically low, providing only one-month import cover, even though they had improved to over USD 4 billion. Analysts projected that the rupee might recover to the range of Rs 270-275 against the US dollar, but this significant recovery was expected to be temporary, lasting for a brief period of approximately two weeks.
On Tuesday, two prominent global rating agencies, Moody’s Investors Service and Fitch Ratings, cautioned that Pakistan would require significantly more funds than what it was receiving from the IMF to fulfill its debt obligations and support its economic recovery. These agencies highlighted that Pakistan needed to repay USD 25 billion in the current fiscal year to meet its debt maturities.
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