Following the attainment of International Monetary Fund (IMF) staff level approval for the next loan tranche of $700 million, the Pakistani currency staged a recovery, dipping below Rs288 against the US dollar in the interbank market, marking the end of a straight one-month-long downward trend on Thursday.
According to the State Bank of Pakistan’s (SBP) data, the domestic currency rebounded by 0.26%, or Rs0.76, settling at Rs287.38 against the greenback. Earlier, the currency had momentarily gained over Rs2, reaching a one-week high at Rs286/$ during early trading hours.
Over the course of the previous 17 consecutive working days, the currency had experienced a cumulative loss of around 4%, totalling over Rs11. It closed at a seven-week low of Rs288.14/$ on Wednesday.
The Exchange Companies Association of Pakistan (ECAP) reported a recovery of 0.25%, or Rs0.75, bringing the open market rate to Rs288.75/$.
Market analysts suggest that the partial recovery in the currency aligns with expectations. Experts had predicted a potential recovery once the IMF successfully completed the first economic review of Pakistan under its $3 billion loan programme.
The timely conclusion of the review and the achievement of the staff-level agreement with the IMF have paved the way for the second loan tranche of $700 million. The IMF is expected to release the tranche next month, in December 2023, after the IMF executive board gives its final approval.
The currency is anticipated to stabilise around Rs285/$ from now until the IMF disburses the next tranche.
Read: RDA inflows increase 7% in September
Earlier, the currency had plummeted to a seven-week low, exceeding Rs288/$ due to pent-up demand for foreign currency. Importers had refrained from buying dollars, anticipating a peak in the rupee in September and October 2023.
The currency had previously made a recovery of 11%, or over Rs30, in the two months, reaching a threemonth high just below Rs277/$ in mid-October.
RDA Inflows
Foreign currency inflows sent by overseas Pakistanis through Roshan Digital Account (RDA) reached a new record gross level of $6.89 billion at the end of October 2023. In the month alone, expatriates sent $142 million, according to the SBP.
These inflows are supportive of rupee stabilisation. Out of the gross inflows over the past 38 months, non-resident Pakistanis have withdrawn $1.52 billion and utilised $4.22 billion in Pakistan. The remaining balance stands at $1.15 billion, with a net investment of $728 million in conventional and Shariah-compliant Naya Pakistan Certificates (NPC), $25 million deposited in their bank accounts, and other liabilities at $23 million
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