IMF assistance a ray of hope for rupee

KARACHI: Inflows from the International Monetary Fund (IMF) is a ray of hope for the rupee, after it witnessed a significant decline against the dollar. Despite strong receipts of exports and workers’ remittances, the local currency failed to recover against the greenback.

The IMF has announced a $650 billion financial package to boost the global economy. Pakistan will also get $2.77 billion of this package.

Finance Minister Shaukat Tarin at a press conference two days ago announced that the IMF assistance amounting to $2.77 billion would be directly transferred to the State Bank of Pakistan (SBP) on August 23, 2021.

Tarin expressed the hope that the amount would ease pressure on the exchange rate and external sector.

Pakistan’s exports exhibited a 16.44 per cent growth in July 2021 to $2.33 billion, compared with $2 billion during the same month of the last year.

Meanwhile, the workers’ remittances also maintained a strong trend in July 2021, as the SBP received $2.71 billion during the month.

The central bank said the workers’ remittances continued positive trend, remaining above $2 billion for the 14th consecutive month. Further, this is the second highest-ever level of remittances reported in July.

However, the external payment has offset the positive outlook of inflows. The trade deficit for the month widened over 85 per cent to $3.1 billion in July 2021, compared with the deficit of $1.67 billion during the same month of the last year.

The higher deficit is mainly because of sharp increase of 48 per cent in import bill. The import bill increased to $5.43 billion in July 2021, compared with $3.67 billion during the same month of the last fiscal year.

The higher trade deficit indicates the current account deficit for the month, which will be released by the SBP in the coming days.

The current account deficit for June 2021 significantly widened to $1.644 billion, which took the total deficit to $1.85 billion for the fiscal year 2020/21.

Market analysts said the ease in the coronavirus restrictions has escalated the demand for imported finished products and raw materials. Further, an increase in the world oil prices also put pressure on the import payments.

The rupee during the outgoing week fell to $164 against the dollar. The local currency was at a 10-month low against the greenback.

Realising the deterioration in the rupee value, the business community has urged the government to ensure stability in the local currency.

“The industrial expansion and economic growth is not possible without stability in the local currency, as the dollar has been appreciating against the rupee for the last more than 10 months because of the higher current account deficit and burgeoning import bills,” a business leader Anjum Nisar said in a statement.