KARACHI: Pakistani currency dealers said on Thursday uncertainty continued to prevail in the market despite assurances from the government that it was close to finalizing a bailout deal with the International Monetary Fund, leading to the rupee depreciating further and trading at Rs282.30 against the United States dollar in the interbank market.
The rupee has been falling since January after foreign exchange companies removed a cap on the exchange rate, a key demand of the IMF as part of a program of economic reforms it has agreed on with the cash-strapped South Asian nation.
On Wednesday, the currency had closed at Rs279.12 against the USD in the interbank.
“Procrastination at IMF front is creating uncertainty in the market despite the assurance about signing a staff-level agreement with the IMF,” Zafar Sultan Paracha, general secretary of the Exchange Companies Association of Pakistan (ECAP), told Arab News. “The market wants to see some tangible actions at the IMF front.”
“The financial institutions are also involved in currency manipulation, while slow encashment by exporters and high demand from importers is also weakening the Pak rupee,” Paracha added.
Facing an acute balance of payments crisis, Pakistan is desperate to secure external financing, with less than three weeks’ worth of import cover in its foreign exchange reserves.
Pakistan secured a $6 billion IMF bailout in 2019. It was topped up with another $1 billion last year to help the country following devastating floods, but the IMF then suspended disbursements in November due to Pakistan’s failure to make more progress on fiscal consolidation.
While the move to remove the foreign exchange rate cap has increased the chances of a restart in IMF funding, Pakistan is also reeling from multi-decade high inflation, which economists fear will now get worse.
Most of Pakistan’s critical imports, including fuel, are paid for in dollars.
