The delay in the finalization of a deal with the International Monetary Fund (IMF) continued to roil currency markets on Thursday morning, with the Pakistani rupee seeing a Rs3.38 depreciation against the dollar in the interbank market.
According to information provided by the Exchange Companies Association of Pakistan, the rupee was trading at Rs282.50 at 11:05 am today (ECAP).
In the interbank market, the local currency yesterday closed at Rs279.14.
‘Uncertainty over IMF Deal’
According to Zafar Paracha, secretary general of (ECAP), a delay in an agreement with the International Monetary Fund looked to be the main cause of the currency depreciation.
“The uncertainty will remain in the market until an agreement is struck with the lender and payment is not received from other countries,” he continued.
According to Paracha, the IMF, and foreign investors are also “pressuring” Pakistan to weaken the rupee in order to attract foreign investment into a variety of national industries. “Investors want to take advantage of the dollar spike, which is another major factor contributing to the devaluation of the rupee,”
Before the IMF agreement was finalized, in his view, currency stability was not possible.
Due to delays in a deal that Pakistan and the International Monetary Fund have been discussing since early last month, the currency has been declining recently.
One of the tasks the IMF wants Pakistan to do is shift to a market-based currency exchange rate regime. If the IMF’s board approves this measure, a funding tranche of over $1 billion that has been held up since late last year over a policy framework will be released.
The business’s requirements are designed to make sure Pakistan reduces its fiscal deficit before presenting its annual budget in June.
The majority of the other earlier steps, such as increasing the cost of fuel and energy, ending subsidies in the export and power industries, and raising extra money through new taxes in a supplemental budget, have already been taken by Pakistan.
But, the budgetary changes required by any agreement are likely to increase the already record-high inflation rate, which reached 31.5 percent in February.
Bilateral and multilateral external financing commitments and raising policy rates are two other demands by the IMF that Pakistan is yet to meet.
