High hopes of loan inflows drive rupee recovery
PHOTO: FILE
Pakistani currency maintained its upward trend for the second consecutive day on Thursday on the back of high hopes for the revival of International Monetary Fund’s (IMF) loan programme.
It recovered 1.04% (or Rs2.82) and closed at a nine-day high of Rs270.51 against the US dollar in the inter-bank market. Hopes of traders came true after market’s closure as the government announced that the IMF had handed over the Memorandum for Economic and Financial Policies (MEFP) at the conclusion of 10-day talks. The loan programme will resume once the government signs and submits the MEFP to the lender of last resort.
The rupee regained 2.13% (or Rs5.77) in the past two days compared to Tuesday’s close at Rs276.28 against the greenback. Financial experts anticipated that the currency would consolidate in the range of Rs265 to Rs270 to a dollar until fresh inflows from the IMF and other multilateral and bilateral creditors started pouring in.
The IMF is expected to release the next loan tranche of $1.1 billion in a few weeks or about a month. Besides, debt inflows from other multilateral and bilateral creditors would continue to give direction to the rupee-dollar parity, they said.
Earlier, the rupee devalued by a staggering 16.51% (or Rs45.69) over 10 working days, touching an all-time low at Rs276.58 to a dollar on February 3, 2023 compared to Rs230.89 on January 25, 2023.
The massive devaluation came after the government ended its control over the exchange rate with effect from January 26, 2023 on recommendation of the IMF.
Prior to that, the currency moved in a range of Rs218 to Rs231 per dollar since the return of Ishaq Dar as finance minister in September. Dar was earlier known for protecting the rupee value as he did not believe in devaluation.
The restoration of market-based exchange rate has, however, left the rupee massively undervalued on the internationally recognised Real Effective Exchange.
Gold loses shine
Gold maintained its downward trend for the fifth consecutive working day on Thursday, losing Rs3,300 to Rs194,700 per tola (11.66 grams) amid appreciation of the rupee against the greenback. The precious metal has cumulatively lost Rs13,800 in the past five days.
Earlier, it hit an all-time high at Rs210,500 per tola after people started parking their savings in safe-haven assets to stave off the impact of rupee devaluation.
Published in The Express Tribune, February 10th, 2023.
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