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Rupee recovers following Dar's assurance over IMF deal

Finmin Ishaq Dar had assured of striking long-stalled deal with IMF by next week

By Business Desk
March 03, 2023
A foreign currency dealer counts US dollars at a shop in Karachi, Pakistan, May 19, 2022. — AFP/File
A foreign currency dealer counts US dollars at a shop in Karachi, Pakistan, May 19, 2022. — AFP/File

The US dollar registered a sharp decline against the rupee Friday morning, a day after the local currency fell sharply — by nearly Rs19 — in the interbank market, as the Pakistani financial market pins hopes on assurances given by Finance Minister Ishaq Dar of striking a long-stalled deal with the International Monetary Fund (IMF) by next week.

The local currency appreciated by Rs6.63 or 2.38% in the interbank market and closed at Rs278.46 against the dollar, according to the State Bank of Pakistan (SBP).

On Thursday, the rupee had slumped by nearly Rs19 against the US dollar due to the central bank's monetary policy review and concerns over a stalled deal with the International Monetary Fund (IMF).

The rupee had fallen by 18.98 or 6.66% to close at 285.09 against the dollar in the interbank market as per the State Bank of Pakistan (SBP), down from Wednesday's close of Rs266.11.

Speaking to The News, ECAP General Secretary Zafar Paracha cited a few reasons for the dollar depreciation, saying that the IMF urged Pakistan to trade the dollar at the rate it was being sold near the Afghan border.

“In other words, the IMF had stated that rather than the interbank rate or the open market, our true rate should be the grey market rate," he added.

Dar sees IMF agreement next week as negotiations near conclusion

Meanwhile, a day earlier, Finance Minister Ishaq Dar had assured that Pakistan would strike a staff-level agreement with the Washington-based lender next week as the negotiations were about to conclude.

The finance minister — who took charge in September last year after Miftah Ismail was removed — had also said that the economy is headed in the right direction and blamed miscreants for spreading rumours about Pakistan's possible default.

"Anti-Pakistan elements are spreading malicious rumors that Pakistan may default. [...] SBP forex reserves have been increasing and are almost US $1 billion higher than four weeks ago despite making all external due payments on time," finmin Dar had said.

The finance minister had added that the negotiations with IMF are about to conclude and we expect to sign SLA with the Fund by next week. "All economic indicators are slowly moving in the right direction," he had added.

Local authorities have been negotiating with the IMF since early February over policy framework issues and are hoping to sign the SLA that will pave the way for more inflows from other bilateral and multilateral lenders.

Once the deal is signed, the lender will disburse a tranche of more than $1 billion from the $6.5 billion bailout agreed to in 2019, which will serve as a lifeline for the cash-strapped nation.

The coalition government has already taken a string of measures — including adopting a market-based exchange rate, a hike in fuel and power tariffs, withdrawing subsidies, and more taxation to generate revenue to bridge the fiscal deficit.