- The local currency made a notable comeback last month.
- The appreciation of the Pakistani rupee will likely be short-lived.
- There is danger amid fear of unrest before the elections.
The recent surge in the value of the Pakistani currency against the US dollar will come to an end amid the financial crisis. bloomberg Goldman Sachs Group Inc. was quoted as saying on Thursday.
The local currency made a remarkable comeback from its record low early last month and became the world’s best performing currency in September due to the crackdown launched by the authorities against hoarders and currency smugglers.
“Given rising interest costs and only short-term arrangements with the International Monetary Fund and bilateral financing to support external balances, the recent appreciation of the Pakistani rupee will be short-lived,” Goldman analysts led by Kamakhya Trivedi wrote on Wednesday. Report.
“The market will continue to require a premium for the Pakistan rupee ahead of the elections.”
The rupee has risen nearly 9% since late August, making it the best-performing currency globally after Afghanistan’s Afghani, as authorities cracked down on illicit dollar trade.
But risks still remain as investors brace for potential unrest as the country prepares to hold national elections in the first few months of next year.
Flows from exports and remittances also remain low, making the country more dependent on foreign aid from Middle East countries as well as China for dollar inflows.
An IMF team is scheduled to visit Pakistan next week to review the country’s economic performance ahead of loan disbursement as part of its $3 billion bailout programme.
Analysts believe the rupee is likely to trade in a tight range of 275-285 per dollar at least till the next tranche of the IMF loan program is finalised.
According to dealers, the currency has recently lost ground against the greenback as a result of increased demand for the dollar from importers, while exporters’ dollar sales have slowed down as they expect the rupee to appreciate in the coming days. Will stabilize at the current level.