A day after Finance Minister Miftah Ismail announced a $2.3 billion loan arrangement with a Chinese banks consortium, the Pakistani rupee was strengthened against the US dollar by Rs. 2.93 in the interbank market on Thursday morning.
At around 10:44 am, the dollar was trading for Rs. 209 in the interbank market. According to the State Bank of Pakistan (SBP), the previous day’s close was Rs. 211.93 versus the US dollar.
As the rupee was trading at 208–209.50 against the dollar in the TOM (one-day forward) market, analysts had predicted a correction today. The appreciation was in line with their predictions.
Given the high likelihood of the International Monetary Fund (IMF) program’s revival, dollar inflows into Pakistan contingent on the IMF, the anticipated launch of Sukuk by the government, and a decline in global crude oil prices, analysts predicted that the outlook for the currency will be bullish in the sessions to come.
“I think the rupee-dollar parity should improve as the IMF deal along with the Chinese deposit should improve sentiment in the currency market,” said Samiullah Tariq, Head of Research at Pakistan-Kuwait Investment Company.
Progress has been made in reaching an agreement between Pakistan and the IMF on the budgetary measures for the fiscal year 2022–2023; the two parties will shortly share a draught memorandum of economic and financial policy (MEFP).
The international lender’s expansion of the $6 billion Extended Fund Facility’s size and duration is another expectation held by the administration.
After Pakistan inked an RMB 15 billion ($2.3 billion) loan facility arrangement with a Chinese consortium of banks, as revealed by finance minister Miftah Ismail on his official Twitter handle a day earlier, the nation is also anticipated to see inflows from China within a few days.
The anticipated inflows will support the rupee and foreign exchange reserves.
The rupee’s gain could, however, be fleeting if the IMF program’s resuscitation is delayed or other unfavorable economic indicators emerge.
Despite short-term movements, it is unlikely that the rupee would remain weak until Pakistan signs the staff-level agreement with the IMF.
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