Rupee recovers against dollar as IMF talks begin

KARACHI: The rupee recovered against the dollar on Tuesday, as the authorities have begun talks with the International Monetary Fund (IMF) for the resumption of the loan programme under the Extended Fund Facility (EFF), dealers said.

The rupee recovered Rs1.74 to end at Rs267.89 against the dollar from the previous day’s closing of Rs269.63, which is the all-time low in the interbank foreign exchange market.

The dealers said the local unit made recovery against the greenback, as the local authorities resumed talks with the visiting IMF team.

It was the rupee’s first recovery after a series of crashes against the dollar during the last three days. The local unit fell Rs38.74, or 17 per cent, against the dollar during the last three sessions.

The dealers said the fall in the rupee value was due to the adjustment against the dollar parity. The government during the last few months capped the dollar rate to avoid inflation.

However, after the IMF pressure, the government decided to let the market forces determine the rates. Therefore, the rupee deteriorated following this decision.

The government’s intention to cap the dollar rate adversely affected the inflows, especially the workers remittances and export receipts. Besides, huge losses in the shape of outflows due to uncertain exchange rate and a fall in the foreign investors’ confidence.

Despite the efforts to control the exchange rate and curbing the demand at home, the import bill fell 23 per cent to $31 billion during July-December of the fiscal year 2022/23, compared with $40.56 billion in the corresponding period of the last fiscal year.

On the flip side, exports also recorded a decline of 6 per cent to $14.26 billion during the period under review, compared with $15.12 billion in the same period of the last fiscal year.

Meanwhile, the inflows of workers remittances also declined 11 per cent in the first half (July-December) of the fiscal year 2022/23. The State Bank of Pakistan (SBP) received $14.05 billion during the first half of the current fiscal year, compared with an inflow of $15.81 billion in the corresponding half of the last fiscal year.

The exchange rate outlook is bleak, as the official foreign exchange reserves fell to around a nine-month low.

The official foreign exchange reserves of the SBP fell sharply to only $3.68 billion by the week ended January 20, 2023, compared with $4.601 billion on January 13, 2023.

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