PKR strengthens by Rs5 against dollar in open market
The Pakistani rupee gained Rs5 against the US dollar on Monday with experts attributing the local currency’s gains to the stand-by agreement reached with the International Monetary Fund (IMF) last week.
According to the Forex Association of Pakistan, the rupee had appreciated to Rs285 in the open market as the stock market crossed the 2,000 mark. The interbank rate was not available due to Monday being a bank holiday.
Malik Bostan, Chairman of the Exchange Companies Association of Pakistan (ECAP), expressed optimism about the positive outcomes about the finalisation of the IMF deal. He said that the dollar rate would continue to decline once the interbank market opened on Tuesday.
Bostan further anticipated that the value of the greenback would decrease to Rs275 in days to come.
“We anticipate that, following the IMF agreement, Pakistan will also receive financial assistance from other global institutions which will decrease the demand for the dollar,” he added.
ECAP General Secretary Zafar Paracha said that today was a bank holiday, therefore, exchange companies were also closed.
“With the signing of the IMF agreement and the anticipation of grants from other countries, there is a prevailing downward sentiment, and it appears that the dollar will depreciate by an additional Rs5 tomorrow,” he predicted.
He pointed out that foreign exchange reserves and the IMF grant alone would not be adequate to repay the country’s loans, saying that the government may need to implement additional measures to ensure the rupee’s long-term stability.
Paracha also emphasised the need to assess how effectively the dollar surge could be controlled in the long run, saying that the government “should prioritise this aspect”.
He warned that unless significant spending cuts were implemented, Pakistan would continue to face economic problems and the rupee would remain under pressure.
Separately, Tresmark’s Head of Strategy Komal Mansoor said everyone was impatient for the interbank market to open. “Money changers can sell their forex inventory to banks, so technically, the open market can not go below the interbank.”
She estimated that the rate of the rupee in interbank, if open, would have been at Rs276 against the dollar, explaining that the rate was calculated by taking four sources.
“Rates quoted by money changers in GCC is Rs278/$ (although there are few rupee sellers and mostly buyers remitting to Pakistan). Rates quoted by money changers at the airport do not want to buy dollars above Rs275, whereas rates quoted on local banks’ apps are around Rs272/$.
“Lastly, we have an implied rate of Rs280/$ from potential buyers and sellers of cryptos,” Mansoor added.
Pakistan had secured a badly-needed $3bn short-term financial package from the IMF on Friday, giving the economy a much-awaited respite as it teeters on the brink of default.
The $3bn funding, spread over nine months, was higher than expected as Islamabad was awaiting the release of the remaining $2.5bn from a $6.5bn bailout package agreed in 2019, which expired last week.