Rupee slips amid worries about IMF staff-level agreement

KARACHI: The rupee weakened slightly on Monday as the uncertainty over the finalisation of the staff-level agreement (SLA) with the International Monetary Fund for the second $1 billion tranche of the $7 billion bailout weighed on the local currency.

The rupee closed at 280.37 against the dollar in the interbank market, compared with the previous close of 280.26. The local unit inched up in the open market. It was trading at 282.02 per dollar, up from 282.04 in the previous session.

Analysts observed that the rupee remained weak, trading above the 280 per dollar mark throughout the past week. This was despite receiving inflows related to Ramazan and Eid, a slight increase in forward bookings by exporters due to higher premiums, stable foreign exchange reserves, and a rise in the real effective exchange rate from 104.1 in January to 102.2 in February. Even with these supportive factors, the rupee did not appreciate and remained largely range-bound.

Negotiations with the IMF are still ongoing. According to news reports, the IMF has agreed to a reduction in electricity prices, but other proposals -- such as lower tax rates on property transactions, tobacco, and beverages -- were not approved, said Chase Securities in a note.

The government is actively working to meet the IMF’s requirements to secure an agreement as soon as possible, it added. Analysts expect that the currency market will closely monitor news related to the IMF to determine the future trajectory of the currency in the coming trading sessions.