Buoyed Pakistani rupee thrashes US dollar after IMF deal

By: News Desk
Published: 11:24 AM, 14 Jul, 2022
Buoyed Pakistani rupee thrashes US dollar after IMF deal
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The positive results have started emerging after the acquiescence of the International Monetary Fund regarding the resumption of Pakistan loan programme which has put the ever-rising US dollar on the backfoot as the greenback shed Rs1.35 in its value in the interbank trading, reported 24NewsHD TV channel.

The latest figures coming from the exchange market divulged that in the Thursday morning session of interbank trading by 10:30am, the rupee started showing signs of revival as it gained Rs1.35 against the US currency which was traded for Rs208.75. 

However, towards the end of the day the greenback showed some strength and recovered most of its lost value. As the trading concluded, the rupee was managed to gain only 30 paisas to Rs209.80.

Yesterday, the US dollar jumped to Rs210.10 at the close of the market which opened after a break of five days due to Eid holidays. The yesterday’s dollar rise was ostensibly caused by the uncertainty over the IMF deal

However, after the confirmation by the Fund today that it has reached a staff-level agreement (SLA) with the Pakistan authorities for the conclusion of the combined seventh and eight reviews of the EFF-supported programme which would pave the way for the release of the much-awaited $1.17bn, the market sentiments showed signs of positivity giving boost to the otherwise slumping rupee.

The new agreement follows months of deeply unpopular belt-tightening by the government of Prime Minister Shehbaz Sharif, which took power in April and has effectively eliminated fuel subsidies and introduced new measures to broaden the tax base.

"Pakistan is at a challenging economic juncture," Nathan Porter, who headed the IMF team, said in a statement, adding external factors and domestic policies were to blame.

Pakistan is desperate for international support for its economy, which suffers from poor revenue collection and dwindling foreign reserves to pay its crippling debt.

Welcoming IMF’s agreement to resume the stalled loan programme, Finance Minister Miftah Ismail tweeted today saying “Pakistan and IMF have reached an agreement. We will soon receive $1.17b as the combined 7th & 8th tranche.”

In order to contain inflation and halt the depreciation of Pakistani rupee, the State Bank on last Thursday (July 7) increased the key interest rate by 125 basis points, taking it to 15% amid expectation of further tightening due to a higher inflation outlook.

In an interview with Bloomberg, SBP Acting Governor Murtaza Syed said that with inflation at multi-year highs around the world, Pakistan was taking timely, bold and decisive steps to cool its economy and prevent a de-anchoring of inflation expectations.

The Fund in its statement today emphasized that a proactive monetary policy guides inflation to more moderate levels. Headline inflation exceeded 20 percent in June, hurting particularly the most vulnerable. In this regard, the recent monetary policy increase was necessary and appropriate, and monetary policy will need to be geared towards ensuring that inflation is brought steadily down to the medium-term objective of 5–7 percent. Importantly, to enhance monetary policy transmission, the rates of the two major refinancing schemes EFS and LTFF (which have over recent months been raised by 700 bps and 500 bps respectively) will continue to be linked to the policy rate. Greater exchange rate flexibility will help cushion activity and rebuild reserves to more prudent levels, the IMF observed.

Reporter Ashraf Khan