The likelihood that Pakistan will get a rescue from the IMF later this month and thereby avoid defaulting is growing among investors.
According to a Bloomberg story, the Pakistani rupee, bonds, and equities are all on the rise as investors become more optimistic that their nation would get an IMF bailout.
On Tuesday, dollar bonds were indicated at 95 cents, up from last month’s low of 85 cents. For the eleventh day in a row, the rupee finished the day higher versus the dollar, bringing its monthly rise to almost 11 percent. In addition, the key index of the Pakistan Stock Exchange (PSX) has increased dramatically.
In an effort to avert default, Pakistan’s coalition government has implemented an austerity campaign and made some unpalatable choices. Last month, ratings agencies Fitch Ratings and Moody’s Investor Service predicted that the government will get $1.2 billion from the IMF. There have been recent rumours that Saudi Arabia would renew its $1 billion deposit, reducing the burden on Pakistan even more.
“After completing a number of arduous earlier steps, Pakistan has secured staff-level permission to restart and extend its IMF programme,” a senior economist at the London-based research company Tellimer Ltd. told Bloomberg. “This should pave the path for board approval barring any policy blunders.”
According to the economist, Pakistan would have more time to prepare for a catastrophe once the IMF programme is back on track.
Pakistan also signed an IMF letter of intent on Monday, and the IMF Board will vote on whether or not to approve the first instalment of the loan on August 29.
Minister of Finance Miftah Ismail claims that Pakistan has met the IMF’s requirements by securing $4 billion from friendly nations. The minister also noted that the government’s resolve to limit imports was a major factor in the rupee’s appreciation.
