Wednesday Aug 17, 2022
Pakistan's rupee, bonds, and stocks are rising as investors reckon the country will receive an IMF bailout this month and avert a default, Bloomberg reported.
Dollar bonds due in December were trading at around 95 cents on the dollar on Tuesday, up from a low of 85 cents in July, as investors gained confidence in the debt's repayment. The rupee has risen 11% this month to 213.87 per dollar as of Monday, making it the world's major gainer. The benchmark stock index rose 9%, making it Asia's best performer after Sri Lanka.
Pakistan has implemented austerity measures in order to recapture IMF approval to recommence its stalled bailout package, as border countries ranging from Egypt to El Salvador face default. Fitch Ratings and Moody's Investor Service anticipated in late July that Pakistan would receive $1.2 billion from the IMF, while Saudi Arabia is likely to renew its $3 billion deposit in aid, relieving Pakistan of financial pressure.
"After completing a slew of difficult prior actions, Pakistan finally received staff-level approval to resume and extend its IMF program, which should pave the way for board approval barring any policy mistakes," Patrick Curran, a senior economist at London-based research firm Tellimer Ltd told Bloomberg. "With the program back on track, Pakistan will be given additional runway to avoid a crisis."
On Monday, Pakistan will sign the IMF's letter of intent. The loan is expected to be approved at the IMF board meeting on August 29.
"The rupee's strength reflects the strength of the economy," said Finance Minister Miftah Ismail. "Currency movement is not merely cosmetic. The government's decision to restrict imports is assisting the rupee's rise against the US dollar."
According to Finance Minister Miftah Ismail, Pakistan has secured $4 billion from friendly countries, a condition imposed by the IMF. The IMF is expected to make a decision on the loan on August 29, according to The News, citing Ismail.
Mohammed Sohail, CEO of Topline Securities in Karachi told the publication that IMF loan has been partially priced in, but there are a few other triggers coming up, "Falling oil prices will continue to support the economy, and once the IMF is approved, bilateral funds will flow in," he said.