Rupee Gains Big Against the US Dollar After IMF Announcement

The Pakistani Rupee (PKR) is maintaining its impressive run against the US Dollar (USD) and posted gains in the interbank market today. It gained 89 paisas against the greenback after hitting an intra-day high of Rs. 175.1 against the USD during today’s open market session.

It appreciated by 0.51 percent against the USD and closed at Rs. 175.52 today after gaining one paisa and closing at 176.41 in the interbank market on Wednesday, 2 February.

The rupee closed in the green against the dollar for the sixth consecutive day after the Executive Board of the International Monetary Fund (IMF) approved the resumption of its $6 billion Extended Fund Facility (EFF) program for Pakistan. The executive board, which had convened in Washington, DC, also agreed to relax certain requirements to allow the fourth loan tranche to be released under the $6 billion Extended Fund Facility’s sixth review.

Now completed, the global lender will sign off to make SDR 750 million (about $1,059 million) available for Pakistan, and this will bring the total disbursements under the EFF to about $3,027 million. At the same time, the IMF board has told Pakistan to maintain the momentum on the reform of personal income taxation and the harmonization of general sales taxes, while suggesting that the country will need to increase its income tax rates for the salaried class and implement a single sales tax rate across the provinces.

The latest IMF loan tranche may just be the last one Pakistan will ever need. In this regard, the federal Minister for Finance and Revenue, Shaukat Tarin told Bloomberg that “this program should be enough” to discard the country’s ‘begging bowl’ image from the global lender by issuing an ESG-compliant $1 billion Eurobond in March.

Discussing the rupee’s near-term outlook earlier in the day, the former Treasury Head of Chase Manhattan Bank, Asad Rizvi, explained that “Imports are down 22% vs exports 7.9% that should help CAD too. Despite this, January’s SBP F[ore]x Reserves fell sharply due to sizeable debt payments. I will prefer waiting for next month’s data. Meanwhile, $1bn each Sukuk loan & IMF nod will give temporary respite to [the] PKR”.

The PKR reversed its losses against the other major currencies and reported gains in the interbank currency market today. It gained 87 paisas against the Australian Dollar (AUD), 95 paisas against the Pound Sterling (GBP), and 90 paisas against the Euro (EUR).

Moreover, it gained 88 paisas against the Canadian Dollar (CAD), 23 paisas against the Saudi Riyal (SAR), and 24 paisas against the UAE Dirham (AED) in today’s interbank currency market.