KARACHI: The Pakistani rupee recorded a significant gain of Rs9.58 to reach Rs228.80 against the dollar on Wednesday as the government is reported to fulfill all the prior conditions of the International Monetary Fund (IMF).
The local unit gained Rs9.58 to close at Rs228.80 to the dollar from Tuesday’s closing of Rs238.38 in the interbank foreign exchange market.
Analysts said that various factors came into play to boost investors’ confidence. The IMF official’s announcement that Pakistan fulfilled all the prior conditions for the revival of the Extended Fund Facility (EFF) programme provided a breather to the economic activities, they added.
The resumption of the programme is also likely to pave the way for Pakistan to attract funds from other multilateral lender institutions and friendly countries to provide a boost to the foreign exchange reserves.
The political stability also played a significant role in the improved sentiments of the investors as the coalition government is likely to complete its term. Likewise, the trade deficit came in at $2.64 billion in July, down 47 per cent or $2.32 billion on a month-on-month basis.
Additionally, the finance ministry and the State Bank of Pakistan (SBP) on July 31, issued a joint press release about the government’s strategy for fiscal year 2022/23.
The SBP and the ministry of finance in a joint statement said the rupee was “fully expected to appreciate” in line with a reduced current account deficit and improved sentiment.
However, the narrowing forex reserves of the country remain a concern for keeping the value of rupee stable in the market. The foreign currency reserves held by the SBP recorded a decline of $754 million to clock-in at $8.57 billion during the week ended on July 22, compared with $9.32 billion on July 15. According to the central bank, the decrease came due to external debt and other payments.
The overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $14.41 billion. The net reserves held by banks amounted to $5.83 billion.
The current account deficit remains one of the key challenges for the stability of the rupee, as after moderating in the previous three months, it rose to $1.4 billion in May, on the back of lower exports and remittances partly due to the Eid holiday.
The trade deficit rose to $4.8 billion in June, more than $1.7 billion higher than its February low. While non-energy imports have continued to moderate in the last three months on the back of curtailment measures by the government and the SBP.
The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs23.95 or 11.69 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs228.80.
At the open market, the buying and selling of the dollar was recorded at Rs228 and Rs231 at 4:30pm PST.
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