Pakistani rupee faces strain against US dollar ahead of crucial IMF review. In the wake of the International Monetary Fund’s (IMF) ongoing scrutiny of Pakistan’s $3 billion loan program, the Pakistani rupee is expected to grapple with downward pressure against the US dollar in the upcoming week.
The local currency experienced a 0.60% depreciation, equivalent to Rs2 against the greenback, concluding the week at Rs287.03 on Friday. The foreign exchange market observed a temporary closure on Thursday due to a public holiday.
The IMF mission initiated its comprehensive review of Pakistan’s bailout package on November 2, with expectations of concluding by December 15.
This evaluation will play a pivotal role in determining whether Pakistan is eligible for the anticipated second tranche of $700 million in December.
Notably, the country received an initial installment of $1.2 billion in July under the standby arrangement.
Despite the current strain, financial terminal Tresmark remains cautiously optimistic, asserting that while pressure on the rupee is expected until the IMF review concludes, analysts do not anticipate it surpassing the 290 mark in the interbank market.
Tresmark further speculates that post-IMF approval, the government may leverage the situation to fortify the rupee towards the 280 level.
The report underscores that the rupee is currently under duress due to diminishing export proceeds and the State Bank of Pakistan’s (SBP) active acquisition of dollars to bolster reserves in alignment with IMF stipulations.
Forward premiums have surged across one, two, and three-month periods, reaching 315, 500, and 725 paisa, respectively.
This trend is attributed to a combination of factors, including the SBP winding down its forward book, decreasing from $4.5 billion in June to $3.5 billion in September, aligning with the IMF’s directives.
Despite the tempting premiums, exporters appear hesitant, citing geopolitical risks in the region and a preference to await further clarity on the IMF’s stance regarding the next tranche.
Tresmark notes that the IMF has expressed concerns about the swift devaluation of the currency, prompting inquiries into the government’s plans for stabilization.
As Pakistani rupee faces strain against US dollar ahead of crucial IMF review, the report underscores the substantial efforts made to reverse the rupee’s trend from 314 to 275, emphasizing the importance of preventing mindless depreciation.
Amidst these challenges, the latest remittance figures, coupled with an improving market sentiment and optimism for further enhancements in the balance of payments, contribute to the belief that the rupee may find stability in the near future.
