Pakistan’s currency, the rupee, has shown signs of improvement, gaining over 12 rupees or 4.5% against the USD in the interbank market on Friday. The rupee has reached an all-time low of Rs285 per US dollar as a result of yesterday’s historic decline of 6.7% or Rs19.
Finance Minister Ishaq Dar stated that the government anticipates concluding a staff-level agreement with the International Monetary Fund (IMF) by the end of the following week. The long-awaited IMF programme is viewed as an essential step towards economic survival and preventing an impending default.
Furthermore, the State Bank of Pakistan (SBP) reported that after China’s $700 million loan, foreign exchange reserves increased for the third consecutive week and reached a nearly six-week high of $3.8 billion.
Additionally, to support the rupee against the US dollar indirectly, the central bank raised its key policy rate by 300 basis points to a 26-year high of 20%. The increase in the policy rate drives up the cost of doing business, drives up the cost of borrowing money, and deters imports.
IMF worries that the government was still in control of the rupee and the black currency market was reorganising led to the rupee falling to a record low of Rs285 per dollar. Lenders, investors, importers, and exporters are all experiencing anxiety as a result of this volatility.
The ongoing volatility, according to Khurram Schehzad, CEO of Alpha Beta Core, is more likely to cause anxiety than anything else.
The recent developments are generally good for the Pakistani economy because they help to stabilise the rupee and allay worries about long-term economic viability. However, additional steps will be required to guarantee long-term economic stability and expansion.
