Rupee continues to recover for third consecutive session

KARACHI: The Pakistani rupee recovered for the third consecutive session against the dollar to reach Rs204.85 on Thursday, as the government expressed the hope to successfully complete the International Monetary Fund (IMF) programme.

The local unit gained 26 paisas to close at Rs204.85 to the dollar from Wednesday’s closing of Rs205.11 in the interbank foreign exchange market.

Analysts said that the third consecutive gain of the rupee is the result of positive sentiments of the traders and investors as the government officials have announced nearing a successful agreement with the IMF.

The government also took various measures to curb the import bill of the country by putting a ban on the import of various luxury items coupled with tightening the rules for auto financing by the central bank to provide stability to the foreign exchange reserves of the country and reduce the current account deficit.

The negotiations between the government and the IMF for the revival and extension of the Extended Fund Facility (EFF) programme were delayed due to the subsidies on the prices of fuel and power.

In a bid to secure a deal with the IMF, the government slashed the subsidies on fuel prices and imposed new taxes on various sectors of the country in the fiscal year budget 2023 which is likely to help in concluding the dialogues on a positive note between the government and the IMF.

Likewise, the government signed a $2.3 billion loan facility agreement with a consortium of Chinese banks which had a multiplier effect on the flight of the rupee against the foreign currency.

Pakistan also signed a Debt Service Suspension Agreement with the French Republic on Monday, for the suspension of $107 million loans, under the G-20 Debt Service Suspension Initiative (DSSI) framework.

This amount, initially repayable between July and December 2021 will now be repaid over a period of six years (including one-year grace period) in semi-annual installments.

The expected inflows from friendly countries and the IMF loan will go a long way in strengthening the foreign exchange reserves of the country besides making way for the government to secure further loans from other multilateral lenders.

The foreign exchange reserves held by the State Bank of Pakistan (SBP) declined by a massive $748 million during the week ended on June 17, falling to a critical level of $8.24 billion.

Total liquid foreign reserves held by the country stood at $14.21 billion as of June 17, with net foreign reserves held by commercial banks clocking in at $5.97 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 Rs47.31 or 30.03 per cent from Rs157.54 to dollar on June 30, 2021 to the current level of Rs204.85.

At the open market, the buying and selling of the dollar was recorded at Rs 204.1 and Rs 206.6 at 4:30pm PST.