KARACHI: The rupee posted its biggest one-day gain ever on Friday after Pakistan’s Supreme Court ruled that former prime minister Imran Khan’s arrest was unlawful and ordered his release from custody, helping to ease the political tension that fueled unrest across the country.
In the interbank market, the local unit closed at 285.08 per dollar, compared with an all-time low of 298.93 hit on Thursday. It rose by 13.85 rupees—a record highest recovery in absolute terms. The daily surge of 4.86 percent was the best performance for the rupee since 1999.
The currency appreciated by Rs9 in the open market. It was selling at 289 per dollar.
This week’s arrest of Khan on graft charges led to deadly violence, increased political unrest, crippled Pakistan’s economy and left the nation on the brink of default. The country has been experiencing the worst economic crisis in decades, with skyrocketing inflation, dwindling foreign exchange reserves, and the International Monetary Fund bailout being delayed formonths. The deadly protests, detention of key PTI figures and deployment of troops since Imran Khan’s arrest had exacerbated instability on the economic and political fronts, putting an adverse impact on the rupee, which was on the verge of crossing the 300 mark.
However, the Islamabad High Court’s Friday decision to allow him two weeks of bail in connection with a land corruption case marked a turning point in the continuing political drama. Following the court’s ruling, dealers thought that the political turmoil would abate a little bit, which would have an impact on the movement of the rupee.
“The recent decline [in the rupee] was due to the arrest of Imran Khan. As things eased up a little, the market reversed those losses,” said Fahad Rauf, the head of research at Ismail Iqbal Securities. The sharp rebound in the rupee from a record low was also helped by the IMF statement, which said that the global lender remains engaged with Pakistan on the programme despite the recent happenings in politics, which gave some confidence to market participants.
However, the same statement also said that the nation would end its fuel subsidy programme and “durably allow” a market-based exchange rate. Pakistan needs “significant” additional financing, according to another IMF statement, for the staff-level agreement to be finalised. The explicit meaning of “durably allow” and “significant” is very unclear right now, as it is difficult to understand what exactly more is required from the IMF side, said Chase Securities in a note.
Finance Minister Ishaq Dar also said the country will not accept IMF demands anymore as a lot has already been done and Pakistan will not default, with or without the IMF. “We think what he meant to say was Pakistan will not default without IMF under his remaining tenure which is of less than 3 months now before the term of current government ends,” it added.
