Rupee likely to remain stable on anticipated IMF inflow

"Upcoming IMF tranche is seen as a significant buffer that should mitigate impact of bond repayment," says currency dealer

By
Our Correspondent
A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, Pakistan December 3, 2018. — Reuters
A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, Pakistan December 3, 2018. — Reuters  
  • Pakistan expected to receive final tranche under bailout program. 
  • Market sentiment is leaning towards stable rupee, says dealer.
  • Rupee not likely to see large fluctuations due to IMF, say traders. 

KARACHI: Despite Pakistan's repayment of $1 billion in international bonds, the rupee is expected to remain stable in the coming week over the anticipated inflow from the International Monetary Fund (IMF), The News reported Sunday. 

The country is expected to receive the final tranche under the bailout program, which is due within the month and is poised to balance the outflow from the Eurobond payments.

“Market sentiment is leaning towards a stable rupee in the immediate future,” said a currency dealer. “The upcoming IMF tranche is seen as a significant buffer that should mitigate the impact of the bond repayment.”

During the outgoing week, the local currency saw two trading sessions. It closed at 277.95 against the dollar against the dollar on Monday while it closed at 277.94 on Tuesday. Markets were closed from Wednesday to Friday for public holidays on account of Eid-ul-Fitr.

The dollar bond repayments made by the State Bank of Pakistan (SBP) on Friday are anticipated to strain the country's foreign exchange reserves.

However, the traders said that the rupee is not likely to see a large fluctuation as the payments were planned and due to the optimism about the new IMF loan programme.

“Because of the weak dollar demand from importers and the improved dollar liquidity brought about by higher remittances, dollar sales by exporters, and positive sentiments, we anticipate that the rupee will be stable over the next week,” said a forex dealer.

IMF Chief Kristalina Georgieva confirmed that the inflation-hit nation was seeking a fresh bailout package after the completion of Stand-By Agreement (SBA). 

Pakistan and the global lender reached a staff-level agreement on the second and last review of the SBA, which, if cleared, the country will receive about $1.1 billion this month. The IMF board is expected to review the matter in late April.

Hence, the SBP-held foreign exchange reserves will not be majorly affected as $1.1 billion is expected to be received this month. 

Meanwhile, investors have positive sentiments after the remittances grew and a financial package from Saudi Arabia for Pakistan as the two countries have jointly agreed to expedite the implementation of the first phase of a $5 billion package.

Remittances also increased in the month of Ramadan and Eid holidays, reaching the $3 billion mark. This robust figure has the potential to result in a current account surplus for the month.