There was a good recovery in the rupee against the dollar in the open market

In this undated photo, a currency dealer can be seen counting Rs 5,000 and $100 notes.  — online/file
In this undated photo, a currency dealer can be seen counting Rs 5,000 and $100 notes. — online/file
  • Interbank rates not available due to bank holidays.
  • The stock rallied and posted the most gains in nearly three years.
  • The rupee is expected to appreciate in the near term, both in the interbank and open market.

KARACHI: The Pakistani rupee gained ground against the US dollar on Monday after the government signed a staff-level agreement (SLA) with the International Monetary Fund (IMF) for a $3 billion financing facility.

The rupee gained Rs 5 to close at Rs 285 in the open market. Interbank rates were not available today due to bank holiday.

Analysts had already predicted that when the market – which was closed since Friday on account of Eid holidays – would open, the rupee would appreciate, but the rise would be short-lived.

The rupee is expected to appreciate in the near term – both interbank and in the open market – but there will be no major or lasting recovery as the lifting of import restrictions will put pressure on the local currency.

Islamabad and the Washington-based lender on Friday finally signed an SLA on a $3 billion stand-by arrangement that will allow the near-default country to get its economy back on track.

The IMF’s executive board will meet in mid-July to approve the disbursement of funds to Pakistan, which is facing a severe balance of payments crisis and dwindling foreign exchange reserves – enough for less than a month’s worth of imports .

Not only did the rupee recover, but shares It also edged higher, posting its highest gain in nearly three years, and Pakistan’s dollar bonds also extended their rally.

Dr. Khaqan Hasan Najeeb, former advisor to the Federal Ministry of Finance, said that Pakistan has seen a shortage of dollar liquidity for the past several months as the country is outside the purview of the IMF programme.

As a result, he noted, the flow of commercial – multilateral, bilateral and friendly countries – slowed down – causing the country to face a dollar liquidity crisis.

With Pakistan eyeing the IMF programme, the lender had also placed a condition that the value of the rupee should be determined by market forces and the government should not interfere.

This also played a role in the fall in the value of the rupee.

“Supply-side shortfalls and uncertainties about Pakistan’s economic future have only pushed the rupee in one direction,” Najib said.

He said, “…the idea of ​​a market-based exchange rate is that once conditions improve the currency should move both ways.” He said that now that the IMF deal has been secured, the rupee will appreciate.

“The dollar liquidity crunch in Pakistan should ease, which means the currency is likely to strengthen, including an improvement in supply, sentiment improving and those using it as a store of value, and exporters also realizing their receivables.” ending.”

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