KARACHI: The national currency and stocks continued bullish trajectories on Wednesday as Pakistan nears approval by the International Monetary Fund board for the disbursement of a $1.17 billion loan and the United Arab Emirates (UAE) has expressed interest in investing $1 billion in Pakistan, traders and analysts said.
The Pakistani rupee posted another gain of 0.96 percent, or Rs2.13, against the United States dollar in the interbank market to close at Rs221.91. The rupee has gained by 7.8 percent or Rs 17.38 in an uptrend that has continued for two weeks, according to State Bank of Pakistan data.
The recovery in the currency markets comes after the government took steps to curtail imports and meet the preconditions of the IMF for the revival of a $6 billion program signed in 2019 to stave off a balance of payments crisis.
“The current bullish trend in the currency market is mainly due to the nearing of IMF board meeting which is expected by the end of this month, August 2022,” Samiullah Tariq, Director Research at the Pakistan Kuwait Investment Company, told Arab News.
“The confidence was further boosted by the expected investment of $1 billion from UAE companies in Pakistan that is vital for bridging a $4 billion financing gap pointed out by the IMF. The exporters are also selling dollars in market which is appreciating the rupee.”
The IMF has reached a staff level agreement with Pakistan that would pave the way for a disbursement of $1.17 billion after board approval and subject to Islamabad convincing the fund about the availability of funds to fill a $4 billion financing gap. Pakistan hopes to fill the gap with funds from friendly countries in the form of deposits, investment in stocks and oil and gas deferred payment facilities.
Last week , the UAE’s state news agency said the country intended to invest $1 billion in Pakistani companies across various sectors, including gas, energy infrastructure, renewable energy and health care. The country needs another $3 billion, which will most likely come from Saudi Arabia and Qatar.
Following the currency market, stocks also closed bullish with the benchmark KSE-100 index closing at 42,494 points, up by 398 points. Investor participation remained healthy as hefty volumes were witnessed in the main board and third tier stocks.
“Stocks showed another bullish session on strong rupee recovery and hints over UAE interest to invest $1bn through Pakistan Stock Exchange PSX,” Ahsan Mehanti, CEO of Arif Habib Corporation, told Arab News.
“$4.794 billion RDA (Roshan Digital Account) receipts and likely $1.5 billion ADB (Asian Development Bank) approval for support to overcome balance of payments crises upon IMF program board approval this month played a catalyst role in bullish activity.”
Pakistan’s import bill declined from $7.8 billion in June 2022 to $4.8 billion in July 2022, mainly due to an import restriction imposed by the government. The import curb has not only reduced the trade deficit but also eased pressure on the rupee.