In a positive turn of events, the Pakistani currency experienced a slight uptick of 0.03%, or Rs0.08, reaching Rs283.84 against the US dollar in the interbank market on Friday. This improvement followed the State Bank of Pakistan (SBP)’s announcement of a $30 million increase in foreign exchange reserves, reaching $4.46 billion by the week ending April 20, 2023.
The surplus supplies of US dollars in the interbank market, accompanied by the central bank’s purchase of the excess reserves, led to a higher supply compared to the demand for foreign currency. Consequently, exporters complied with the central bank’s directive to sell their foreign currency holdings by April 30, 2023, to avoid monetary penalties.
Financial analysts observed that the Pakistani currency has been stabilising around Rs284 against the US dollar lately. This marks the second time in a month that the domestic currency has consolidated around this level. Previously, it reached a one-month high of Rs283.39/$ on Wednesday, recovering from an all-time low of Rs288.43/$ two weeks prior on April 11, 2023.
The currency’s recent improvement can be attributed to hopes of the International Monetary Fund (IMF) resuming its loan program worth $7 billion for Pakistan. Finance Minister Ishaq Dar’s assurance that the government has met all conditions set by the lending institutions also boosted confidence. However, the IMF had previously expressed concerns about the government’s intervention in the interbank market to control the rupee-dollar exchange rate, despite commitments to market-driven forces.
Experts anticipate that if the IMF program is revived within the next few weeks, the currency may recover further to around Rs275/$ by June 30, 2023. However, any delay in resuming the program could lead to a downturn in the local currency against the US dollar.
These recent developments signal a positive trajectory for Pakistan’s currency, with the country’s foreign reserves showing signs of improvement. As the economy aims for stability, the fate of the currency remains intertwined with the revival of the IMF program and the government’s commitment to market-driven exchange rates.
Published in The Express Tribune, April 29th, 2023.
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