Pakistan-IMF accord: PKR expected to stabilize next week

A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, Pakistan on December 3, 2018.  - Reuters
A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, Pakistan on December 3, 2018. – Reuters
  • Pakistan-IMF deal has a positive effect on the rupee.
  • Dealers expect a balanced inflow, outflow of dollars.
  • The IMF board will meet on July 12 for loan approval.

KARACHI: The rupee is expected to remain stable next week as currency markets expect Pakistan’s bailout package to be approved by the International Monetary Fund’s (IMF) executive board on July 12.

According to a report published in newsDealers said on Saturday that the inflow and outflow of the dollar are likely to be balanced.

At the interbank market, the local unit gained 2.8%, or Rs 8, week-on-week.

An analyst said, “During the next week, the rupee may not move much. The foreign exchange that banks generate (through exports and remittances) should be equal to the amount of import payments before releasing it.” “

“By using this strategy, the current account deficit is kept under control, and unrestricted imports are avoided,” the expert said. He said that the State Bank of Pakistan (SBP) is actively monitoring the current account.

Once funds are received from the IMF and friendly countries, it is possible that imports may be allowed more freely.

However, according to the analyst, since payments are being accepted faster, businesses are not facing substantial delays in imports.

Currency experts expect the IMF to approve the standby arrangement during its executive board meeting on July 12 and $1.1 billion will be deposited in the SBP account by July 18.

Pakistan Tehreek-e-Insaf (PTI) chairman, main opposition leader in Pakistan and former prime minister Imran Khan met the IMF team at his residence in Zaman Park, Lahore on Friday.

Khan voiced his support for the bailout deal with the global lender, but sought guarantees of timely elections in the country.

The IMF said it was seeking the support of Pakistan’s political parties, including Khan, for a new nine-month stand-by arrangement of $3 billion and policies related to the program ahead of the country’s autumn elections.

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

“Our last week’s forecast of 275-280 till IMF approval and 282-287 after IMF approval still stands,” it added.

These views focus on possible significant inflows triggered by the IMF accord, undervalued rupee on REER basis, increased interest rates, continued management of imports, increase in foreign exchange reserves due to favorable current account deficit and the SBP’s key objective of reserve building. were based. rapidly.

Pakistan’s foreign exchange reserves with the central bank rose by $393 million to $4.462 billion in the week ended June 30.

The country’s dollar bonds saw a correction during the last week. According to JS Global, following the positive response to the Pakistan-IMF agreement, the country experienced a significant increase in its international bond prices, indicating increased investor confidence.

“However, bond prices and yields have improved this week,” it said. “At current prices, bond prices are seeing an average 7% day-to-day decline.”

JS Global said that on a cumulative basis, international bond prices have increased by an average of about 26% since the recent low of June 23, 2023.

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