Tag: foreign exchange market

  • Pakistani rupee continues to gain ground against major currencies

    Pakistani rupee continues to gain ground against major currencies

    In Tuesday’s interbank session, the Pakistani rupee (PKR) demonstrated resilience against the US dollar (USD), settling the trade at PKR 280.25 per USD.

    This maintained a stable position compared to the previous session’s closing rate of PKR 280.24 per USD.

    Throughout the day, the currency experienced an intraday high (bid) of Rs280.6 and a low (ask) of Rs280.1.

    In the open market, Exchange Companies quoted the US dollar at Rs279 for buying and Rs281 for selling.

    Notably, the PKR celebrated its 9th consecutive weekly victory, appreciating by 1.04 rupees against the US dollar last week.

    This positive trend can be attributed to various factors, including increased liquidity in the foreign exchange market, tighter enforcement of regulations, a reduction in the money supply, a balance of payments surplus due to low import demand, and a moratorium on Chinese debt repayments.

    In comparison to major currencies, the PKR exhibited strength by gaining 1.17 rupees against the Euro, closing at Rs305.92 in contrast to the previous value of Rs307.09.

    The British Pound became more affordable by Rs2.15, concluding at Rs355.06 compared to Rs357.21 from the previous day.

    The Swiss franc experienced losses of 2.48 rupees, closing at Rs326.23 as opposed to Rs328.71 in the previous session.

    Against the Japanese Yen, the PKR gained 0.96 paisa, closing at Rs1.9181 versus Rs1.9277 a day ago.

    Meanwhile, the Chinese Yuan saw a slight decline, losing 6 paisa and closing at Rs39.01 against Rs39.07 from the previous session.

  • IMF and Pakistan seal agreement on $3 billion SBA, await board approval

    IMF and Pakistan seal agreement on $3 billion SBA, await board approval

    In a significant development, the International Monetary Fund (IMF) declared on Wednesday that its team and Pakistani authorities have successfully concluded the initial review of the $3 billion, nine-month Stand-By Arrangement (SBA).

    This staff-level agreement awaits the approval of the IMF Executive Board.

    Upon endorsement, approximately US$700 million (SDR 528 million) will be accessible, contributing to a cumulative disbursement of nearly US$1.9 billion under the programme.

    A delegation from the IMF, led by Nathan Porter, conducted discussions in Islamabad from November 2–15, 2023, focusing on the inaugural review of Pakistan’s economic programme supported by the IMF SBA.

    The nascent recovery, supported by international partners and enhanced confidence indicators, is attributed to the stabilizing policies outlined in the SBA.

    The disciplined implementation of the FY24 budget, ongoing adjustments in energy prices, and increased inflows into the foreign exchange (FX) market have alleviated fiscal and external pressures.

    The IMF anticipates a decline in inflation in the upcoming months, driven by diminishing supply constraints and modest demand.

    Nevertheless, Pakistan remains exposed to significant external risks, including heightened geopolitical tensions, escalating commodity prices, and potential tightening in global financial conditions.

    It is imperative to persist in efforts to enhance resilience in the face of these challenges, according to the international lender

  • IMF’s conditions for agreement: Pakistan must arrange foreign loans and restore foreign exchange market

    IMF’s conditions for agreement: Pakistan must arrange foreign loans and restore foreign exchange market

    In a recent development, the International Monetary Fund (IMF) has urged Pakistan to address its political disputes in accordance with the constitution. This statement came after Prime Minister Shehbaz Sharif reached out to IMF Managing Director Kristalina Georgieva in a last-ditch effort to revive the derailed $6.5 billion bailout package and avoid default.

    Following the conversation between Shehbaz and Georgieva, IMF Mission Chief to Pakistan Nathan Porter made an unusual statement, expanding the IMF’s focus to the political arena.

    While the IMF typically refrains from commenting on domestic politics, Porter emphasised the importance of finding a peaceful way forward in line with the constitution and the rule of law. This statement comes in the midst of an ongoing crackdown against PTI workers, abductions of individuals, and other political issues.

    Responding to questions from The Express Tribune, Porter outlined the conditions Pakistan must fulfill to reach an agreement with the IMF. These conditions include arranging foreign loans, approving a new budget in line with the IMF framework, and restoring proper functioning to the foreign exchange market.

    Prime Minister Shehbaz sees the IMF as the last resort to avoid default and thus decided to intervene. Following the conversation with the IMF chief, he instructed the finance ministry to share details of the next budget with the IMF.

    Meanwhile, Finance Minister Ishaq Dar criticised the IMF again, stating that it would be biased and shameful if the 9th review did not take place. However, a top finance ministry official confirmed that the prime minister had contacted the IMF managing director to break the deadlock.

    Time is running out for Pakistan, as there is only one month left before the program expires. Pakistani authorities still believe that the IMF can shorten the review completion period by calling a board meeting within two weeks of announcing the staff-level agreement.

    Porter emphasised that sustaining strong policies, obtaining sufficient financing from partners, and engaging in ongoing reforms are crucial for Pakistan to maintain macroeconomic stability. He also stressed the importance of strengthening domestic revenue mobilization, eliminating state-owned enterprise losses, reducing inefficiencies, and allowing for increased social and development spending.

    While Pakistan claims to have fulfilled all the conditions agreed upon in February, the sources indicate that Pakistan is currently not meeting all three conditions set by the IMF. The value of the rupee in the open market is significantly different from its value in the interbank market, and the new budget is not aligned with the IMF’s requirements.

    To bridge the financing gap until June this year, the IMF had asked Pakistan to arrange $6 billion in fresh loans. So far, Pakistan has obtained assurances for $3 billion from Saudi Arabia and the United Arab Emirates. The government is ready to share the details of the budget and the foreign exchange policy with the IMF.

    The $6.5 billion bailout package has been derailed since November last year and is set to expire on June 30. Of the total amount, the IMF has not disbursed $2.6 billion, including a $1.2 billion tranche linked to the completion of the 9th review. Pakistan’s foreign exchange reserves stand at $4.1 billion, which is not sufficient to cover the upcoming $25 billion in repayments.

    There are still differences of opinion regarding the current account deficit for this fiscal year. The government’s revised estimate of around $4 billion to $4.5 billion has not yet been accepted by the IMF.

    Initial reports suggest that the government intends to announce an expansionary budget of around Rs14.6 trillion with a deficit of around 7.4 per cent of the gross domestic product (GDP). However, this budget would need to be adjusted to align with the IMF’s requirements.

    The IMF’s Fiscal Monitor report projected a budget deficit as high as 8.3 per cent of the GDP for the next fiscal year, significantly higher than the government’s proposal. The finance ministry had initially proposed an overall budget deficit of around 6.9 per cent of the GDP or Rs7.3 trillion.