Rupee hits five-month high on hopes of IMF approval

Currency hits Rs277.80/$ while gold prices reach new record

KARACHI:

The Pakistani rupee appreciated by Rs0.07 to a five-and-a-half-month high of Rs277.80 against the US dollar in the interbank market, ahead of the International Monetary Fund (IMF) Executive Board's meeting on Wednesday, where it is expected to give final approval for a $7 billion loan programme for the country.

In the open market, the domestic currency rose by Rs0.23 on a day-to-day basis, closing at Rs280.45 against the dollar.

The IMF Executive Board meeting, coupled with the central bank's decision to extend the deadline for exchange companies to continue importing US dollars in physical form until the end of June 2025, is expected to increase the supply of foreign currency in the domestic economy.

Once the IMF approves the 37-month Extended Fund Facility (EFF), Pakistan is expected to immediately receive the first tranche of $1-1.5 billion. This would unlock additional inflows from other multilateral and bilateral creditors, helping to strengthen the country's foreign exchange reserves and stabilise the rupee against the dollar.

Pakistan already reached a staff-level agreement with the IMF in mid-July 2024. Having fulfilled nearly all the conditions of the new bailout package, the IMF Executive Board added Pakistan's loan programme to its meeting agenda.

The rupee had previously gained Rs0.86 against the dollar over eight consecutive working days (excluding a slight Rs0.03 dip on Monday), supported by higher foreign currency inflows than the demand for imports.

Robust inflows of workers' remittances and improved export earnings have continued to bolster foreign exchange reserves over the past eight weeks. These reserves have increased by around $450 million in the past two months, reaching a 26-month high of $9.5 billion.

Gold at new high

Gold prices in Pakistan surged to a new record of Rs273,000 per tola (11.66 grams) on Tuesday, rising by Rs1,100 in a single day, in line with the global uptrend.

According to data from the All Pakistan Sarafa Gems and Jewellers Association, the precious metal gained $11 per ounce (31.10 grams), hitting an all-time high of $2,628 in the global market.

The US Federal Reserve's interest rate cuts, combined with escalating geopolitical tensions in the Middle East, have fuelled extended buying of gold as a safe haven asset at the global level.