Government Successfully Negotiated The Highly-Anticipated Agreement
A day after the government successfully negotiated the highly-anticipated agreement with the International Monetary Fund, the rupee finally ended its losing skid against the dollar on Wednesday, rising Rs1.80 in the early morning interbank market (IMF).
The currency strengthened against the dollar from Tuesday’s close of Rs211.80 to Rs210, according to the Forex Association of Pakistan (FAP). The dollar reached a record high yesterday, rising sharply by Rs2.
The rupee’s value has been steadily falling for weeks before this development, which has mostly been attributed to the nation’s rising import costs and diminishing foreign exchange reserves.
The Agreement Will Be Finalised
The Exchange Companies Association of Pakistan’s general secretary, Zafar Paracha, attributed the rupee’s recovery to the good news surrounding the IMF accord. By the end of the week, hopefully, the agreement will be finalised, opening the door for loans from China and other financial institutions.
Market Had Aniticipated The Local Currency
The market had anticipated the local currency to recover from the 212-mark on the basis of the IMF arrangement, which is exactly what transpired, according to Tresmark research director Komal Mansoor.
There is no other significant obstacle, she said, adding that the petroleum levy and tax reform have been put in place. She is certain that this will cause the market’s opinion to shift from “very negative to neutral” and finally to positive.
IMF Loan Facility Had Been In Limbo
The IMF loan facility had been in limbo since early April due to an ongoing impasse in negotiations. The lender had previously voiced concerns over fuel and energy subsidies instituted by the previous PTI government and has since done the same regarding targets set by the new administration for the upcoming fiscal year.
In July 2019, Pakistan and the IMF agreed to a 39-month, $6 billion Extended Fund Facility, however, the Fund ceased disbursing roughly $3 billion when the previous administration broke its promises and announced gasoline and energy subsidies.
However, in a major development, last night, Pakistan and the programme reached an agreement on the federal budget for 2022–2023, which allowed for the revival of the extended fund facility (EFF) after authorities pledged to raise an additional Rs436 billion in taxes and gradually raise the petroleum levy up to Rs50 per litre.
Discussion Between The IMF & The Authorities
Discussions between the IMF staff and the authorities on measures to strengthen macroeconomic stability in the upcoming year continue, according to Esther Perez Ruiz, the IMF’s resident representative in Pakistan.
Over the following few days, the IMF mission and the State Bank will finalise the monetary targets, and in the interim, they will share the draught of a Memorandum of Economic and Financial Policy (MEFP).