Pakistani currency maintained its downward trend as it lost 1.04% (or Rs2.19) to a two-week low at Rs210.10 against the US dollar in the inter-bank market on Wednesday on speculation of further delay in the resumption of IMF loan programme for Pakistan.
Fact checks, however, suggest the International Monetary Fund (IMF) has signalled that it will publish a staff-level agreement in the coming days. This means the global lender is about to revive its $6 billion loan programme.
The rupee hit an all-time low at Rs211.93 in mid-June 2022. The latest drop came on reports that the government was considering reducing petroleum product prices following the price fall in global markets. Pakistan meets over 70% of domestic demand for energy through imports.
The government’s consideration of a reduction in petroleum product prices gave birth to speculation about delay in the IMF programme, as the price cut was viewed against the IMF loan conditions, experts said.
On the other hand, Pakistan’s risk of default on international payments – measured through the credit default swap (CDS) – shot up to 1,600 points during the day compared to the usual around 400 points on the index.
The development took place after the country’s foreign exchange reserves slipped below $10 billion for the second time in less than two weeks. The reserves have fallen to critically low levels covering less than six weeks of import.
At the same time, the yield on Pakistan bonds maturing in December 2022 shot to an all-time high above 40% in global markets.
The two developments – high CDS and yield – forced currency dealers to sell the rupee at a two-week low price against the greenback in the inter-bank market.
Analysts said the resumption of the IMF programme would help improve the foreign exchange reserves and support the rupee against the US dollar.
They anticipated the rupee would partially recover to around Rs200 after the IMF released the next loan tranche of $1.2 billion sometime in August.
Published in The Express Tribune, July 14th, 2022.
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