‘Optimism’ drives rupee’s recovery against dollar

• Rupee gains 1.96 against dollar in interbank market. 
• Market optimistic about IMF deal going through.
• Dollar crunch leads to fall in foreign exchange reserves.

The Pakistani rupee continued its upward trend against the US dollar on Wednesday after the government took measures to fulfil the prerequisites for unlocking the critical $1.1 billion International Monetary Fund (IMF) tranche.

In the interbank market, the rupee closed at 265.38 after gaining 1.96 or 0.74% against the dollar, up from yesterday’s close of 267.34, according to the State Bank of Pakistan’s (SBP) data.

In conversation with Geo.tv, capital market expert Saad Ali said that the steps taken by the government led to optimism about the resumption of the IMF programme which will help rebuild the country’s forex reserves through multilateral and bilateral assistance.

The SBP-held foreign exchange reserves have slipped to $2,916.7 million as of February 3, just enough to provide an import cover of around three weeks.

“The government is swiftly taking prior actions, which is getting Pakistan closer to IMF programme resumption. Moreover, the inflows are improving due to the reduced gap between the official and informal markets,” Fahad Rauf, head of research at Ismail Iqbal Securities told The News on Tuesday. 

The Prime Minister Shehbaz Sharif-led government is all set to present the Finance Bill 2023 before the parliament later today, which is expected to be approved by Thursday and will pave way for the authorities to impose taxes of Rs170 billion — in line with the IMF’s demands.

Pakistan and the IMF have started virtual talks after 10 days of face-to-face discussions in Islamabad last week on how to keep the country afloat ended without a deal.

The country’s economy is in dire straits, stricken by a balance-of-payments crisis as it attempts to service high levels of external debt amid political chaos and deteriorating security.

PM Shehbaz previously called the conditions for the $1.1 billion loan instalment “beyond imagination”.