Rupee expected to stay stable next week

KARACHI: Dealers in currency market say the rupee is expected to stay stable next week as the market hopes for the approval of Pakistan’s bailout package by IMF Executive Board on July 12.

The dealers hope that the IMF may approve the package during its Executive Board meeting on July 12 and that $1.1 billion will be credited to the SBP account by July 18.

Pakistan Tehreek-e-Insaf (PTI) Chairman, the key opposition figure in Pakistan and a former prime minister, met the IMF team on Friday at his residence in Zaman Park, Lahore.

The PTI chairman expressed his support for the bailout deal with the global lender but sought guarantees for timely elections in the country.

The IMF stated that it was seeking the backing of Pakistan’s political parties, including the PTI chairman’s, for the new nine-month $3 billion stand-by arrangement and the policies linked with the programme in the run-up to the country’s autumn elections.

“The market does not expect any drastic movement in USD-PKR parity,” said Tresmark — a financial portal for treasury markets — in a note.

“Our last week’s projections of 275-280 till IMF approval and 282-287 post-IMF approval still hold,” it added.

The views were based on potentially significant inflows catalysed by the IMF agreement, the rupee being undervalued on a REER basis, elevated interest rates, continued management of imports, increased forex reserves on account of favourable current account deficit, and SBP’s key objective to build reserves rapidly.

They say that dollar inflows and outflows are likely to be balanced.

In the interbank market, the local unit rose by 2.8% or Rs8 week-on-week.

“Over the course of the next week, the rupee is probably not going change much. The quantity of foreign currency that banks generate (via exports and remittances) must equal the amount of import payments before releasing them,” said an analyst.

“By using this strategy, the current account deficit is kept under check, and unrestricted imports are avoided,” the expert noted, adding that the State Bank of Pakistan (SBP) seemed to monitor the current account actively.

Once inflows from the IMF and friendly nations are received, it is feasible that imports may be permitted more freely.

However, according to the analyst, because payments are increasingly being accepted, businesses are not encountering substantial import delays.