The rupee’s upward trend against the dollar continues unabated.
The Pakistani rupee continued its upward trajectory for the ninth consecutive working day, gaining Rs3.38 to trade at Rs215.50 against the US dollar in the interbank market on Friday.
Despite declining foreign exchange reserves, the rupee has continued to strengthen against the US dollar since the supply of the currency has continually outpaced demand in the economy.
Exporters are selling dollars in the market as the rupee rises. Previously, they withheld dollar shipments in anticipation of further currency decline. According to central bank data, the currency closed at Rs218.88 on Thursday. In the last nine trading sessions, the currency has recovered more than 9% (or about Rs21).
The rise is being pushed by increased optimism about the resumption of a stalled International Monetary Fund (IMF) rescue package later this month, after the government successfully completed the prerequisites for the release of $1.17 billion in funding.
Prior to that, the rupee fell 13.75% (or Rs31.31) in ten consecutive working days, reaching an all-time low of Rs239.94 versus the US dollar on July 28.
News reports that Pakistan will receive a letter of intent from the Washington-based lender before the weekend sparked hopes of the country securing IMF funding soon, causing the rupee to rise further, given the perception that the IMF’s endorsement is critical to unlocking other foreign inflows and rolling over bilateral and multilateral loans.
The government’s and the State Bank of Pakistan’s reassuring pronouncements also helped the rupee.In a recent interview with CNBC, Finance Minister Miftah Ismail stated that Pakistan had effectively avoided a crisis similar to that of Sri Lanka.
Acting Governor of the State Bank of Pakistan, Dr. Murtaza Syed, is hopeful that the country can soon bridge its $4 billion external financing shortfall with the support of friendly countries under IMF conditions, despite depleting foreign reserves.
Analysts believe that progress on the IMF programme has alleviated fears about the country’s potential default on international debt payments. To keep the economy afloat, the country must remain in the IMF programme.At its meeting on August 24, the IMF board is likely to assess the staff-level agreement negotiated with Pakistan last month. The next two loan tranches are anticipated to be approved by the board. It will also explore expanding the credit facility to $7 billion, up from the $6 billion agreed upon in 2019.
