The rupee is expected to remain range-bound next week as Saudi Arabia’sassurances on Pakistan’s deposits to the International Monetary Fund (IMF) increased the chances of the revival of the bailout programme, The News reported Sunday.
Moreover, investors are also expecting the same funding commitment from the United Arab Emirates (UAE).
The local currency experienced significant volatility in the outgoing week. It ended the week at Rs284.65 agai nst the greenback on Friday in the interbank market.
Meanwhile, the State Bank of Pakistan (SBP) raised its benchmark interest rate by 100 basis points to 21% on Tuesday to rein in inflation.
The latest IMF loan optimism follows Finance Minister Ishaq Dar’s assurance to the country that the IMF deal was on track, who stated that everything needed from the country to conclude the ninth review of a $6.5 billion loan programme with the IMF was “now complete” and the only thing left to be done was a confirmation of a $1 billion commitment from a friendly country.
The finance minister addressed the nation a day after cancelling his trip to Washington for the IMF and World Bank’s spring meetings, citing domestic political unrest as the cause.
“We expect the rupee to trade range-bound next week due to positive sentiments stemming from increased odds of IMF programme resumption,” said a currency dealer. “Although there will still be demand for the dollar from importers, it is anticipated that remittances would increase supply,” he added.
Saudi Arabia has confirmed to the IMF that it will provide Pakistan with $2 billion in assistance. The country is just seeking confirmation of a $1 billion promise from a single friendly country that is UAE, according to the finance minister. All of their prerequisites to finish the staff-level agreement will then be satisfied. Then, it takes additional two weeks to bring the issue up at the board meeting.
Pakistan’s foreign exchange reserves held by the central bank dropped by $36 million to $4.207 billion in the week ending March 31. The SBP’s reserves are enough to cover around one month of imports. The central bank attributed the repayment of external debt to the decline in forex reserves. With low FX reserves, the central bank has been discouraging letters of credit for imports which are not essential. The government also increased the sales tax for the import of many items from 19% to 25%, terming them “luxury”.
Import curbs have forced many companies to cut their production activities on the back of a shortage of import-based investory.
Commenting on external funding requirements, the SBP governor at an analysts’ briefing held after the monetary policy meeting on Tuesday said out of $23 billion debt repayment in FY3023, $18.5 billion had been repaid or rolled over.
Remaining external payments in the next three months of the fiscal year stand at $4.5 billion, out of which a $2.3 billion loan is likely to be rolled over. So, net external payment for the next quarter of the current fiscal year stands at $2.2 billion.
The central bank has revised its FY2023 current account deficit target from $10 billion at the start of the year to below $6 billion.
Source: Geo. tv
