KARACHI: The Pakistani rupee rose against the US dollar Monday. It is after the government inked a SLA with the IMF for a $3 billion lending facility.
The open market rupee rose Rs5 to Rs285. A bank holiday prevented today’s interbank rate.
Analysts expected the rupee to strengthen briefly when the market opened after the Eid holidays on Friday.
As import restrictions lifted, the rupee will rise in the interbank and open markets, but it won’t recover.
Islamabad and the Washington-based lender reached a SLA on a $3 billion stand-by arrangement Friday. It allows the near-default nation to recover economically.
Pakistan’s balance of payment crisis and low foreign exchange reserves will addressed by the IMF’s executive board in mid-July.
The rupee, stocks, and dollar bonds all surged.
Dr. Khaqan Hassan Najeeb, former adviser to the Federal Ministry of Finance, claimed Pakistan had experienced a dollar liquidity constraint for months without an IMF plan.
Commercial, multilateral, bilateral, and friendly countries’ inflows declined, causing a dollar liquidity shortage.
With Pakistan pursuing the IMF plan, the lender also required that the rupee’s value be determined by market forces.
This also devalued the rupee.
“Shortfall on the supply side coupled with uncertainties about Pakistan’s economic future have pushed the rupee only in one direction,” Najeeb said.
“…the idea of a market-based exchange rate is that once the condition improves, the currency should move in both ways,” he said, adding that the rupee will gain after the IMF deal.
“Pakistan’s dollar liquidity crunch should ease, which means that the currency is likely to strengthen with supply improving. Sentiment improving, and people, including those who use it as a store of value, and exporters also liquidating their receipts.”
