Rupee declines despite IMF nod

KARACHI: The Pakistani rupee shed Rs1.15 against the dollar to reach Rs210.95 on Friday after the investors’ sentiments cooled down regarding the International Monetary Fund (IMF) recent development.

The local unit shed Rs1.15 to close at Rs210.95 to the dollar from Thursday’s closing of Rs209.80 in the interbank foreign exchange market.

Analysts said that the greenback pushed down the rupee after it made some ground the previous day on the successful staff level agreement between Pakistan and the IMF for the combined seventh and eighth reviews of the Extended Fund Facility (EFF) programme.

The agreement is subject to approval by the IMF’s Executive Board and once approved by the board, around $1.17 billion worth of loan tranche will be released, bringing the total disbursements under the programme to around $4.2 billion.

However, despite a successful agreement with the multilateral lender, the local currency took a dip in the interbank market as the investors and traders do not seem to be very optimistic regarding the positive impact of the likely funds from the IMF.

The inflows of around $1.17 billion under the EFF programme are less likely to have a major impact on the overall macroeconomic indicators of Pakistan, thus, a latest decline in the value of the rupee despite the IMF’s nod.

Likewise, the rising import bill, in which oil imports hold the major role, has further widened the current account deficit keeping the rupee under pressure.

The current account deficit remains one of the key challenges for the stability of the rupee, as after moderating in the previous three months, it rose to $1.4 billion in May, on the back of lower exports and remittances partly due to the Eid holiday.

The trade deficit rose to $4.8 billion in June, more than $1.7 billion higher than its February low. While non-energy imports have continued to moderate in the last three months on the back of curtailment measures by the government and the SBP.

Pakistan’s total liquid foreign exchange reserves dropped $132 million to reach $15.611 during the week ended on July 7, compared with $15.742 billion on June 30.

The SBP’s reserves declined $99 million to $9.717 billion during the week ended on July 7, compared with $9.816 billion during the previous week. Similarly, the net foreign reserves held by commercial banks were also down $33 million to $5.893 billion.

The total trade deficit of the country 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 Rs6.10 or 2.97 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs210.95.

At the open market, the buying and selling of the dollar was recorded at Rs209 and Rs 211.5 at 4:30 pm PST.