Pakistani currency got the much-awaited support and hit a one-week high beyond Rs285 to a dollar on Thursday after confirmation from the International Monetary Fund (IMF) that Saudi Arabia had given a financial commitment of $2 billion to Islamabad.
The State Bank of Pakistan (SBP) reported that the rupee regained 1.21%, or Rs3.43, and closed at Rs284.42 against the greenback in the inter-bank market. The currency had hit an all-time low for the second consecutive day on Wednesday at Rs287.85/$.
Talking to The Express Tribune, Arif Habib Limited Head of Research Tahir Abbas said that the green light from Saudi Arabia, which indicated that it stood with Pakistan in the current testing times, provided vital support to the rupee.
Financial commitment from friendly countries is the last IMF condition for the resumption of its $6.5 billion loan programme.
“Saudi Arabia’s financial commitment suggests Pakistan is getting closer to the resumption of loan programme,” Abbas said.
He pointed out that the UAE’s nod for a similar financial commitment was still awaited, which was required to boost Pakistan’s foreign exchange reserves, a must to stabilise and strengthen the rupee against foreign currencies.
Pakistan has to bridge the external financing gap of $6 billion by acquiring loans from friendly countries by June 30, 2023. “The IMF wants to see half of the expected inflows reflect in the foreign exchange reserves by the time the loan programme is resumed,” he said.
“Loan programme should restart now. Government should focus on the economy. Delay in revival of the programme has already caused heavy losses such as the closure of industrial units and loss of a large number of jobs.”
Suspension of the programme for about four times since July 2019 has led to a historic high inflation, massive rupee depreciation and soaring interest rate in the country.
He expressed hope that the rupee would stabilise around Rs275 to the dollar by the end of June 2023 after a staff-level agreement with the IMF.
Earlier, the rupee lost 1.5%, or Rs4.19, in the past four successive working days to an all-time low at Rs287.85/$ on Wednesday.
Abbas emphasised that all political parties must lend their support to the IMF programme. “Whoever comes to power after general elections this year will have to opt for a new and bigger IMF programme to fix the faltering economy in the long run.”
Revival of the current programme will result in release of a loan tranche of $1.1 billion.
Besides, other global creditors will unlock financing of billions of dollars as they have committed around $9 billion in flood relief at the Geneva conference in January 2023.
The receipts will improve Pakistan’s foreign exchange reserves, reduce the risk of debt default and prop up the rupee.
State Bank Governor Jameel Ahmad said on Tuesday that the reserves would cross $10 billion in three months, once the government reached an agreement with the IMF. At present, the reserves stand at $4.24 billion.
Published in The Express Tribune, April 7th, 2023.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.