KARACHI: Following anticipated developments, the new IMF program has successfully defended the Pakistani currency, resulting in a significant rebound against the US dollar. Today, the rupee surged by 3.62% or Rs10, reaching Rs276 against the US dollar in the interbank market.
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In the open market, the currency also experienced a notable rise of Rs10, reaching Rs280 against the greenback this morning. This stands in contrast to Finance Minister Ishaq Dar’s earlier claim of Rs270-272 against the dollar in the open market on Monday. Currency dealers noted that the retail market had largely remained closed the previous day.
Last Friday, Pakistan signed a staff-level agreement (SLA) with the IMF for a new nine-month loan program worth $3 billion.
Today marked the first trading session in the interbank market after a week of Eid holidays, weekly offs, and the start of the new fiscal year 2024. Pakistan secured the IMF lifeline during the holiday period. Experts predict that the first IMF tranche of $1-1.25 billion will arrive in July, while new loan inflows from other multilateral creditors and friendly nations, totaling around $1.5-2 billion, will contribute to rebuilding the country’s foreign exchange reserves and bolstering the rupee against the US dollar.
Although reserves have recovered to over $4 billion, they still remain critically low, providing only one month’s worth of import cover.
Experts project that the currency may strengthen to Rs270-275 against the USD, but this substantial recovery is expected to be temporary, lasting for a brief period of approximately two weeks.
In the previous fiscal year, which concluded on June 27, 2023, the currency experienced a historical decline of 28% (Rs81), plummeting to Rs286 against the dollar.
The slump during FY23 was largely attributed to persistent delays in the revival of the $7 billion IMF program, which ended prematurely on June 30, 2023.
Prior to signing the new IMF deal, the government took measures to address IMF concerns by implementing reforms in the domestic currency market.
Last week, the central bank reopened all imports to fulfill another condition for the program and adjusted the FY24 budget in accordance with the recommendations put forth by the IMF.
