IMF projections deepen currency downturn
The finance minister stressed that there was a sincere effort on the part of him and his team to complete the IMF’s programme but the delay was unfortunate. Photo: afp
The Pakistani currency faced a fourth consecutive working day of decline, falling by 0.26% or Rs0.76 to reach a three-week low at Rs283.80 against the US dollar in the interbank market on Wednesday. This downward trend comes after the latest International Monetary Fund (IMF) projections, which have also prompted the Exchange Companies Association of Pakistan (ECAP) to maintain the open market rate at Rs290 per US dollar. The gap between the interbank and open market rates has narrowed to around Rs6, aligning with the IMF’s recommended 1.25% limit for consecutive five business days.
According to the IMF’s estimates, the average rupee-dollar parity for FY24 is expected to be Rs306/$, possibly testing Rs320-325/$ throughout the year.
Speaking to The Express Tribune, Yousuf Rahman, Head of Research at KASB Securities, said he foresees the rupee depreciating by another 6-7%, reaching Rs310/$ (interbank) by the end of December 2023. He expects the currency to continue depreciating by Rs1-2 each month. Rahman notes that even though the government may not fully liberalise imports due to limited availability of US dollars, the rupee’s fall may accelerate significantly if such control is completely lifted.
In tandem with the currency depreciation, gold prices in Pakistan have surged by 2.5%, increasing by Rs5,400 per tola (11.66 grams) to reach Rs226,400. This spike is primarily due to the latest rupee devaluation and partly in line with global trends in the gold market.
Published in The Express Tribune, July 20th, 2023.
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