Wednesday, June 22, 2022
KARACHI: The Pakistani rupee finally snapped its losing streak against the US dollar on Wednesday, gaining over Rs3 in early morning interbank trade, mainly due to the ‘broad agreement' with the International Monetary Fund (IMF) programme.
However, the momentum was short-lived as clarity on the agreement with the Fund, once again, dented investors' sentiment who thought that the global lender has revived the $6 billion programme only to realise later that it is still on hold.
According to the State Bank of Pakistan, the local currency closed at an all-time low of 211.93 against the US dollar after losing 0.21% in the interbank market. Yesterday, the greenback was at an all-time high, appreciating by a sharp Rs2.
The intra-day optimism came after weeks of persistent declines in the rupee's value, which has been largely attributed to the country's rising import bill, depleting foreign exchange reserves and uncertainty regarding the IMF programme.
Last night Pakistan announced a "broad agreement" with the Fund on next year’s budget.
“We have locked the budget for the fiscal year 2022-23 in consultation with the IMF and now the Fund will consult with the State Bank of Pakistan on monetary targets,” Finance Minister Miftah Ismail told a group of journalists. The minister spoke after having a final round of talks with IMF Mission Chief Nathan Porter.
Although the broad agreement is short of a staff-level pact, it may help soothe markets and end a four-month-long period of uncertainty that took a heavy toll on the country’s currency.
Market experts had opined that this positive breakthrough will give temporary respite to Pakistan’s currency.
Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq said that although the currency has breathed a sigh of relief after the positive news flow, it may only recover around Rs2-3 against the greenback till the end of the fiscal year.
Since the beginning of this fiscal year (July 1, 2021) to date, the rupee has collectively dropped by a massive 34.52% (or Rs54.39) compared to the previous fiscal year’s close at Rs157.54.
The rupee has maintained a downward trend for the last 13 months. It has lost 39.18% (or Rs59.66) to date, compared to the record high of Rs152.27 recorded in May 2021.
Meanwhile, the central bank rebutted rumours, saying that its liquid foreign exchange reserves of $8.9 billion have not dried up and are “fully usable”.
The SBP’s response came after reports implied that the reserves have dried up or are not usable, that the SBP has stopped import payments and that banks have run out of dollars.
The SBP noted that on June 10, it released details of the liquid foreign reserves, which stood at $8.99 billion. It added that those did not include gold reserves and are “fully usable for all purposes”.