KARACHI: The Pakistani rupee gained 59 paisas to reach Rs197.87 on Wednesday as the investors expect the government’s negotiations with the International Monetary Fund (IMF) to complete successfully.

The local unit recorded an increase of 59 paisas to close at Rs197.87 to the dollar from Tuesday’s closing of Rs198.46 in the interbank foreign exchange market. The rupee recorded the historic low of Rs202.01 on May 26, 2022.

The rupee made gains for the fourth consecutive session after the government removed the subsidy on the prices of fuel to fulfill a prerequisite condition of the IMF for the revival of the Extended Fund Facility (EFF) programme, the dealers said.

The latest recovery in the value of the rupee can be attributed to investors’ and traders’ positive sentiments amid the government’s measures to further the process of dialogue with the IMF for the release of the next tranche under the EFF programme, they added.

The resumption of the IMF programme will likely help in boosting the confidence of other multilateral institutions and friendly countries to lend a helping hand to the crisis-hit economy of Pakistan.

Pakistan desperately needs inflow to strengthen its foreign exchange reserves, as the country’s current account and trade deficits are widening on the back of elevated global commodity prices.

The country’s total liquid foreign exchange reserves declined $11 million to $16.150 billion during the week ended May 20, 2022, compared with $16.161 billion as of May 13, 2022.

The State Bank of Pakistan’s (SBP) reserves fell $75 million to $10.089 billion due to external debt repayment. However, the net foreign reserves held by the commercial banks were up $63 million to $6.061 billion.

The widening current account deficit is another threat to the stability of the local unit. Pakistan’s trade deficit showed a sharp growth to $3.64 billion in March 2022, registering an increase of 12 per cent over the same month of the last fiscal.

The total trade deficit escalated to $35.52 billion in the first nine months (July-March) period of the current fiscal year against $20.8 billion in the same period last fiscal year.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs40.33 or 25.59 per cent from Rs157.54 to dollar on June 30, 2021 to the current level of Rs197.87.

At the open market, the buying and selling of the dollar was recorded at Rs196.5 and Rs198.6 at 4:45pm PST.