Karachi: In light of the diminishing foreign exchange reserves and the International Monetary Fund’s (IMF) stringent conditions, the Pakistani rupee is expected to continue its downward trend against the US dollar unless investors’ confidence is restored. The local currency saw a sharp decline of 2.57% in the past week, reaching a record low of 276.58 against the greenback.
The cash-strapped economy of Pakistan is in talks with the IMF mission to restart the suspended $6.5 billion loan program, with discussions underway to finalize the 9th review of the Extended Fund Facility. The State Bank of Pakistan currently holds $3.09 billion in foreign reserves, sufficient to cover only three weeks of imports.
Tresmark, a financial market analysis firm, has noted that Prime Minister Shehbaz Sharif may be attempting to prepare other stakeholders for necessary measures and that the main cause for the rupee’s downfall is the steep decline in reserves, which now stands at $8.7 billion.
According to traders, the rupee will continue to fall unless the IMF comes on board and restores traders’ confidence in the reserves situation. The traders predict that the 1st and 2nd level of resistance at 280/$ and 285/$ will be breached in the coming week, and that 270-275/$ is the fair level post-IMF agreement.
Although the IMF’s requirements may seem onerous, traders agree that they are necessary to bring stability to the chaotic economic landscape caused by political maneuvering. The IMF negotiations are ongoing, but disagreements persist on issues such as taxes and the circular debt management plan.
In conclusion, the IMF’s involvement is seen as a necessary step towards stabilizing the economy, but the cost in terms of shortages, inflation, and uncertainty will be high. The talks between Pakistan and the IMF continue, with a resolution expected in the near future.
