KARACHI: The rupee is expected to trade range-bound next week, depending on the level of demand for the dollars from importers after the central bank removed import restrictions in a bid to secure a deal with the International Monetary Fund, dealers said.
The local currency gained by 0.18% versus the dollar during the outgoing week. On Friday, the rupee rose to 286.74 from 287.26 on Monday.
“We must keep an eye on how the foreign exchange market responds to the State Bank of Pakistan's move to lift all import restrictions,” said a forex trader.
“Only two trading days remain until the current fiscal year comes to a close, thus it is anticipated that businesses and importers would increase their need for foreign currency to settle their bills. However, the inflows associated with Eid ul Azha would limit the rupee’s losses,” the trader added.
The markets will remain closed from June 28 to June 30 on account of Eid ul Adha.
According to analysts, SBP previously eliminated direct import limits and instructed banks to manage liquidity. It appears that the SBP has now formally lifted the requirement for banks.
Analysts predict that the free hand for imports will only be true on paper, maybe as a result of the IMF's demand for a market-based exchange rate. The non-essential imports would still be given low priority, nevertheless, in the background.
According to Geo News, there has likely been a breakthrough in Pakistan's protracted negotiations with the IMF for the tough ninth review.
A deal to release stalled loan is about to be signed between the IMF and Pakistan.
Following Prime Minister Shehbaz Sharif's meeting with IMF Managing Director Kristalina Georgieva in Paris earlier this week, a flurry of talks between the two sides resulted in the development.
The government has agreed to make a number of revisions to its budget for the fiscal year 2024 in a last-ditch bid to get a bailout package from the IMF before it expires this month, announced Finance Minister Ishaq Dar on the floor of the National Assembly.
The $1.1 billion IMF tranche, which has been pending since November of last year, is urgently needed by the current government to avert sovereign default.
The central bank’s forex reserves decreased by $482 million to $3.536 billion in the week ending June 16.
SBP said the country received $300 million in inflows from China as refinancing of loans. The inflows must be taken into account in the reserves position that will be made public on June 23.
The temporary discrepancy caused by the delay between paying off debt and receiving it back is what causes the reserves to fall. Despite that, there are $900 million in debt payments coming in June that won't be rolled over, so it is expected that reserves will be lower at year's end than they are now.