Rupee will remain under pressure till IMF review is completed

A foreign exchange dealer counts US dollars at a shop in Karachi on March 2, 2023.  - Online
A foreign exchange dealer counts US dollars at a shop in Karachi on March 2, 2023. – Online
  • The rupee has weakened by Rs 2 against the dollar this week.
  • On Friday the local closed at Rs 287.03 per dollar.
  • Analysts do not expect the rupee to cross Rs 290.

KARACHI: The rupee is likely to remain under pressure against the dollar in the coming weeks until the International Monetary Fund (IMF) completes its first review of the country’s $3 billion loan programme. news reported on Sunday, citing Tracemark reports.

The local currency declined by Rs 2 or 0.60% against the greenback this week, ending at Rs 287.03 on Friday. The foreign exchange market remained closed on Thursday due to public holiday.

The IMF mission began its review of Pakistan’s bailout package on 2 November and is expected to conclude by 15 December.

The review will decide whether Pakistan will get the second tranche of $700 million in December or not. The country received $1.2 billion as the first tranche of the standby arrangement from the global lender in July.

“Although the rupee will remain under pressure till the IMF is here, analysts do not expect it to trade above 290 in the interbank market,” financial terminal Tracemark said in a client note.

“In our opinion, the government will use this to strengthen the rupee towards 280 levels after getting the IMF approval.”

Tracemark said the rupee is under pressure as export earnings have declined and the State Bank of Pakistan (SBP) is buying dollars to boost its reserves to meet IMF requirements.

The forward premium has reached 315, 500 and 725 paise with the premium for one, two and three months respectively.

“This is due to a combination of factors, with the SBP closing down its forward book (as per the IMF wish list, the SBP forward book has declined from $4.5 billion in June to $3.5 billion in September).

It said that despite these attractive premiums, exporters are not interested as they look at the geopolitical risks of the region and wait till the IMF’s stance on the next tranche becomes clear.

Tracemark said it was not unexpected that the IMF expressed concern about the rapid devaluation of the currency and asked the government about its stabilization plans.

“Tremendous hard work has gone into bringing the rupee’s trend back from 314 to 275 and this hard work should not be wasted by mindlessly letting it fall again.”

The latest remittance data, along with improving market sentiment and expectations of further improvement in the balance of payments, lend confidence that the rupee will stabilize soon.

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