Pakistan’s currency depreciated by a record 28 percent, or about 82 rupees, against the dollar in the outgoing fiscal year, JEE News reported, mainly due to stalled International Monetary Fund (IMF) bailouts. As a result of the program.
In the interbank market, the rupee depreciated to 286 against the dollar on June 27, 2023, from 204.8 on June 30, 2022. On a daily basis, the rupee appreciated by 0.25 percent against the dollar. Monday saw the price close at 286.71 against the dollar.
“FY23 was a challenging year for Pakistan. The rupee came under pressure mainly due to the suspension of the IMF programme,” said Fahad Rauf, head of research at Ismail Iqbal Securities.
“FY24 is going to be challenging again as it is an election year, and uncertainty around the IMF program continues,” Rauf added.
“If Pakistan succeeds in completing the ongoing review, the pressure on the rupee will ease to some extent. However, this will only be sustainable if Pakistan moves into another IMF program quickly enough,” he said. Get in,” he said.
Arif Habib Limited, a Karachi-based brokerage firm, said in a note that the depreciation of the rupee was mainly due to debt servicing challenges, which resulted in a significant drop in capital inflows along with a decline in reserves. happened
Pakistan is awaiting an agreement with the IMF after the global lender takes the monetary and fiscal policy decisions needed to release the $1.1 billion tranche.
The country’s debt program, which has been stagnant for more than six months, expires on June 30.
IMF funding is essential for the South Asian economy, which is in a balance-of-payments crisis as its central bank’s foreign exchange reserves have fallen to just $4 billion, enough to cover a month’s worth of imports. Hardly enough.
For fiscal year 2024, the nation will need $23 billion to finance its current account, repay its external debt and pay interest.
The State Bank of Pakistan on Monday stunned the market by hiking interest rates by 100 basis points, taking them to a record high of 22 percent.
The IMF has made these changes a condition for approval of the staff-level agreement.
These conditions include budget adjustments, removal of administrative import restrictions, and interest rate hikes. Additionally, open market and interbank exchange rate alignment requirements have been met.
Although it was believed that an agreement with the IMF would be announced soon, no official statement has been made yet.
In a video message to the media, Exchange Companies Association of Pakistan (ECAP) President Malik Bustan said the narrowing gap between the interbank and open market exchange rates was a factor in the decline in handi and hawala transactions.
Earlier, there was a difference of Rs 30 between the open market rate and the interbank rate. However now it is only Rs 3. Currently, the official market is trading at 286, and the open market is trading at 289 for Rs.
However, rates provided by ECAP showed the rupee was selling at 290 per dollar in the curb market, up from 291 in the previous session.
Bostan claimed that export earnings have improved over the past three days.
In the last three days before the Eid al-Adha festival, remittances sent by Pakistani nationals working abroad through formal channels (banks) have increased dramatically.
Importers are not opening letters of credit as they expect a big fall in the dollar rate in the coming days. Bostan expects the rupee to rise to the 270 level against the dollar after the IMF deal.
