KARACHI: Pakistan’s national currency on Wednesday recorded its highest single-day gain against the US dollar in four months on Wednesday, appreciating by Rs2.96 against the greenback with financial analysts credited the rupee strengthening to markets anticipating a “positive” outcome of Pakistan’s loan revival talks with the International Monetary Fund (IMF). 

Pakistan’s rupee has seen a downward spiral against the greenback ever since the country’s exchange companies announced removing the cap on the exchange rate. Pakistan’s move to liberalize its exchange market was seen as a sign the country was moving toward implementing the IMF’s tough conditionalities. 

Pakistan’s foreign reserves held by its central bank have dipped to an alarming $3.08 billion, enough to pay for imports of 18 days. Financial analysts have warned that if Pakistan does not successfully revive the stalled $7 billion loan program, it could lead to the country defaulting on its payments. 

Ever since Pakistan removed the cap on its exchange rate on January 25, the rupee has drastically weakened against the US dollar. Over the past two weeks, Pakistan’s currency has declined in value by over Rs40 against the greenback. 

However, the rupee appreciated by Rs2.96 against the US dollar on Wednesday as per the State Bank of Pakistan (SBP). The US dollar is available for Rs273.33 at the interbank market, up from its previous figure of Rs276.28.

The last time the rupee appreciated by a higher margin was on September 27, 2022 when it appreciated by Rs3.11 against the greenback. 

Samiullah Tariq, director of research at the Pakistan Kuwait Investment Company, said the rupee had strengthened against US dollars due to exporters selling their proceeds in the market and markets reacting to an expected “positive” outcome of the IMF talks.

“People also expect positive outcome ongoing talks between Pakistan and IMF which would further strengthen rupee,” he said. 

“The good news for Pakistan is [positive expectation of] ongoing talks between Pakistan and the IMF and that the dollar’s rate against the Pakistani rupee in Kabul, Afghanistan [has] depreciated,” Malik Bostan, chairman of the Exchange Companies Association of Pakistan, told Arab News. 

He said these two developments boosted the market’s confidence and increased the supply of dollars in the market. Bostan said on average, $15 million per day were being smuggled from Pakistan to Afghanistan. He added that not only had this process been stopped, but it had also been reversed.

“The dollar rate in Kabul was Rs272 against the US dollar today while in Pakistan’s open market, the rate was Rs275,” Bostan said. “Who will go to the Afghan market?“

Bostan said that while buyers have stopped buying US dollars, sellers have increased theirs in the market. He added that the current demand-supply situation has almost eliminated the grey or black marketing of the dollar in Pakistan.

He said that after the completion of the IMF’s review of the loan program, the rupee could rise by Rs10 against the greenback.