On IMF success, the rupee breaks its losing streak and gains Rs1.80 versus the dollar.With a gain of Rs1.80 in the early morning interbank market on Wednesday, the rupee ended its losing skid versus the dollar.
The government successfully negotiated the much-awaited agreement with the International Monetary Fund (IMF), which is predicted to enhance the nation’s economic prospects.
According to the Forex Association of Pakistan (FAP), the rupee strengthened from Tuesday’s close of Rs211.80 to Rs210 at 9:49 am. However, the rupee had partially undone today’s gains by 10:45 am, reaching Rs211 in interbank trade.
The latest event comes after weeks of rupee value declines, which have mostly been linked to the nation’s rising import costs and declining foreign exchange reserves. Yesterday, the dollar rose sharply by Rs2 to an all-time high and had been steadily rising against the rupee for the eighth session in a row. The dollar has increased by more than Rs30 since April 11, when the PML-N coalition government took office.
The Exchange Companies Association of Pakistan’s general secretary, Zafar Paracha, attributed the rupee’s recovery to the good news surrounding the IMF accord. “Hopefully, the contract will open the door for a loan from China and other financial institutions once it is finalized by the end of this week.”
The market had anticipated the local currency to recover from the 212-mark based on the IMF pact, which is exactly what transpired, according to Tresmark’s research chief Komal Mansoor.
She asserted that the market sentiment will shift from “very negative to neutral” and eventually to positive after the tax reform and petroleum levies are in place.
The rupee has received some assistance from the IMF announcement, but Mettis Global Director Saad Bin Naseer predicted that it would likely remain under pressure over the next sessions until a final confirmation was made.
Due to fruitless negotiations with the international money lender, the IMF loan facility has been on hold since the beginning of April. The lender previously voiced concerns about fuel and energy subsidies put in place by the previous PTI administration, and it is now concerned about the goals set by the current administration for the upcoming fiscal year.
In July 2019, Pakistan and the IMF agreed to a 39-month, $6 billion Extended Fund Facility, however, the Fund ceased disbursing roughly $3 billion when the previous administration broke its promises and announced gasoline and energy subsidies.
Pakistan and the IMF secured a breakthrough deal yesterday night about the federal budget for 2022–2023. After authorities pledged to raise Rs436 billion in additional taxes and raise the petroleum charge gradually up to Rs50 per liter, this will result in the reinstatement of the extended fund facility (EFF).
Discussions between IMF personnel and the authorities on strategies to promote macroeconomic stability in the upcoming year continue, according to Esther Perez Ruiz, the IMF’s resident representative in Pakistan.
Over the following few days, the IMF mission and the State Bank will finalize the monetary targets, and in the interim, they will share the draught of a Memorandum of Economic and Financial Policy (MEFP).