KARACHI: The Pakistani rupee is expected to recover some ground in the coming week on hopes of an expected staff-level agreement with the International Monetary Fund (IMF), JEE News reported on Sunday.
The currency market still firmed its hopes on a deal with the Washington-based lender even though the greenback closed slightly higher than last week.
The market, however, does not expect any sharp depreciation of the dollar following the signing of the agreement and disbursement of over $1.1 billion by the IMF.
The local currency closed at 280.77 against the dollar on Saturday, up from 278.46 last week. During the week, the dollar-rupee parity fluctuated due to the inflow of $500 million from China and the free float of the currency after Pakistan agreed to leave it to market forces.
Currency traders are now eyeing the IMF deal as it could bring some stability to the market once it is signed. The IMF team left Pakistan about a month ago and since then there has been no agreement between the government and the Bretton Woods institution.
Instead, the global lender has placed a few more conditions on the government before releasing a $1.1 billion tranche of the $6.5 billion program.
To meet some of these conditions, Pakistan had to raise its interest rates and add additional surcharges on electricity bills.
Finance Minister Ishaq Dar also did not give a specific date for signing the agreement with the IMF and only expressed the hope that it would materialize soon.
Currency market dealers said that the delay in signing the agreement has resulted in loss of confidence in the market despite the market-based exchange rate. The extraordinary delay did not bring much-needed confidence and stability to the financial market, which has been under pressure for months since the suspension of the IMF program.
He believed that the program would be revived because the country had almost fulfilled all the conditions without assurances from friendly countries to increase foreign exchange reserves.
Due to the uncertainty regarding Punjab elections, the political situation in Pakistan is also affecting the financial market. The political temperature has risen sharply.
During the outgoing week, the country got some respite in the form of foreign exchange reserves as inflows from China pushed State Bank of Pakistan (SBP) reserves to over $4 billion. Pakistan’s foreign exchange reserves have been on a downward trend for the past several weeks. The country’s reserves are barely enough to cover a month’s worth of imports.
Remittances also increased slightly in the month of February compared to the previous month of January. However, on a year-on-year basis, it recorded a decline of over 9 percent.
