The Pakistani currency continued its upward trajectory for the second consecutive working day, reaching a one-week high against the US dollar. The interbank market saw the currency gain 0.39%, or Rs1.09, closing at Rs277.48 on Wednesday. In the open market, the currency rose by 0.35%, or Rs1, reaching Rs281/$, according to the Exchange Companies Association of Pakistan (ECAP).
The currency’s surge is attributed to high expectations that the International Monetary Fund (IMF) Executive Board will give its final approval for the recently signed staff-level agreement, securing a new loan programme of $3 billion for Pakistan. This positive sentiment has been reinforced by the deposits made by the UAE and Saudi Arabia, with $1 billion and $2 billion respectively, into Pakistan’s central bank.
Finance Minister Ishaq Dar announced the arrival of these new inflows, noting that the country’s foreign exchange reserves have improved by $3 billion within two days. Market experts predict that the currency will stabilise around Rs275-276 in the short to medium term, bolstered by these fresh inflows.
Earlier this year, the currency hit an all-time low of Rs299/$ in May, amidst political and law and order crises. However, with the recent developments, the currency has shown a remarkable recovery. By the end of December 2023, multinational financial institutions and friendly countries are expected to lend a cumulative $4-5 billion, significantly improving the State Bank of Pakistan’s foreign exchange reserves to around two-month import cover, estimated at $7.5 billion.
Published in The Express Tribune, July 13th, 2023.
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