KARACHI: Traders expect that the rupee is likely to weaken further in the coming week as fresh external debt repayments have led to a sharp decline in foreign exchange reserves, leaving investors worried about how the country’s economy will fare. will develop, JEE News reported on Sunday.
“We expect the rupee to depreciate further over the coming week due to a reduction in foreign reserves and foreign debt repayments. Any developments on the IMF [International Monetary Fund] front are expected by the market. Looking forward to it,” said a forex trader.
The local currency closed at 226.94 against the greenback on Monday while ending the week at 227.14 against the dollar in the interbank market on Friday.
The country paid $600 million to the Emirates NBD Bank and $420 million to the Dubai Islamic Bank, reducing the State Bank of Pakistan’s (SBP) reserves to an all-time low of $4.5 billion.
The coming week is proving to be important for Pakistan’s economy. According to a weekly note from Tracemark, a donor conference is scheduled to begin on January 9, led by the United States in partnership with Pakistan to seek support for post-flood recovery.
The IMF team is also coming. If the differences between the government’s and the IMF’s targets can be bridged in the meantime, disbursements can be accelerated. It has not yet been confirmed whether the resumption requires approval from the IMF board,” the report said.
It added that ‘the Army Chief is visiting Saudi Arabia and the United Arab Emirates and nobody is second guessing what the trip is about’.
A delay in $1.1 billion in IMF funding has left Pakistan scrambling to address fears of a default.
Islamabad and the IMF have been at loggerheads over policy and reforms that the country needs to fund. The IMF’s review of the program was due to end in November.
The IMF program is tied to another essential foreign financing, making it difficult for the country to meet its external funding needs. As of June, they totaled more than $30 billion and included imports, especially energy, and debt repayments.
A decline in foreign exchange reserves pressured the rupee due to the government’s slow progress in securing foreign revenue from international lenders.
Given that elections are due this year, the government continues to delay IMF requirements for fear of further loss of political capital.
The local currency has lost 28.3 percent of its value against the dollar in 2022.
Finance Minister Ishaq Dar has assured that the government will complete the IMF programme.
