KARACHI: The rupee appreciated for a second straight session on Wednesday on dollar sales by exporters and prevalence of positive sentiment about the country’s economy after the IMF approved a loan tranche of $1.17 billion, dealers said.
The local unit gained 3 rupees to close at 219 against the dollar in the open market.
In the interbank market, the rupee ended at 218.75 per dollar, compared with 220.12 on Tuesday. It rose by 0.63 percent on a day-on-day basis.
“The rupee continued to gain ground as exporters sold dollars in anticipation of further appreciation in the currency in days ahead. This helped improve dollar supplies in the market,” said a currency dealer.
“The International Monetary Fund (IMF) deal and expectation of foreign aid to counter the devastating floods have calmed investors who now see rebound in the economy next year,” he added.
Investors' sentiment improved after Pakistan successfully revived the IMF programme with the completion of combined seventh and eighth reviews.
This would enable immediate disbursement of $1.1 billion to the country. The IMF has also extended the Extended Fund Facility until June 2023.
Following the IMF approval, it is anticipated that Pakistan will receive additional money in dollars from bilateral, multilateral, and other sources, supporting its foreign exchange reserves.
Additionally, it will stabilise the currency, which had been under pressure recently due to the uncertainty about the IMF program's continuation, particularly in light of the disagreements between the federal and provincial governments.
Analysts said the IMF deal would help stabilise the dangerously low foreign reserves. The central bank’s reserves have fallen as low as $7.8 billion, enough to cover little more than a month of imports. It would also support the country’s external current account.
The current account balance is likely to further improve in coming months on the back of slowdown in the economy, decline in global commodity prices and strict controls over imports.
However, some analysts expect the current account deficit to widen due to the import of food commodities and declined exports of textile, rice, and sugar giving the shortage in the country amid the impacts of the catastrophic floods in the country.
The IMF, in its latest statement, estimates the FY2023 current account deficit at 2.5 percent of gross domestic product (GDP) from 3.5 percent earlier, which is likely due to a revision in the GDP base as the IMF used the old base for previous estimates.
The IMF sees the central bank’s foreign reserves increase to $16.2 billion in FY'23. The budget deficit is estimated at 4.7 percent of GDP, while the primary surplus is at 0.2 percent of GDP, which is the same as the FY'23 budget.