Hopes of fresh inflows drive up rupee further

Market talk suggests that the rupee will reach less than Rs280 per greenback soon

KARACHI:

Pakistani currency, backed by expectations of fresh foreign currency inflows, hit on Monday a new three-month high below Rs282 against the US dollar in inter-bank market in the 23rd consecutive day of winning streak.

According to State Bank of Pakistan’s (SBP) data, the currency extended gains by 0.37%, or Rs1.04, to close at Rs281.65 against the greenback. Market talk suggests that the rupee will reach less than Rs280/$ soon and may even test Rs275/$ under the current recovery spell, as the country’s senior leadership has reaffirmed its commitment to continuing the crackdown on currency and commodity smugglers.

The currency recorded fresh gains on reports that the International Monetary Fund (IMF) may approve the release of next tranche under the ongoing $3 billion loan programme, though Pakistan had missed a couple of targets. An IMF team is scheduled to hold the first economic review in November 2023.

The rupee has cumulatively recovered 9%, or Rs25.45, in the past 23 days, rekindling hopes that import-fueled inflation will slow down in the coming months as the government is considering making a deep cut in petroleum product prices from October 16.

In open market, the currency increased 0.35%, or Rs1, to Rs280.50 against the greenback, according to the Exchange Companies Association of Pakistan. Market talk revealed that Pakistan’s economic team had left for Morocco to attend annual meetings of the IMF and World Bank and meet high-ups of friendly countries like China and Saudi Arabia. It will also discuss the possibility of acquiring commercial loans from global markets. Apart from that, Pakistan has initiated dialogue with the Asian Infrastructure Investment Bank (AIIB) for a loan of $250 million.

Moreover, multilateral and bilateral lending agencies have shown interest in extending new loans of $3.4 billion for the reconstruction of flood-hit areas. They had originally pledged $10.9 billion in flood relief in the Geneva meeting held in January 2023.

Published in The Express Tribune, October 10^th, 2023.

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