The Pakistani rupee has managed to break the US dollar’s upward trend by pulling it down following a hike in POL prices and an increase in the policy rate by the State Bank of Pakistan.
According to forex dealers, the US currency depreciated by Rs1.76 during the morning session of interbank trading on Monday. Today, the rupee was trading at Rs198.
On Friday, the emboldened Pakistani rupee soared past the US dollar by Rs2.25 and closed at Rs199.76.
The rupee, which has been struggling against the US dollar for the last three weeks, gained strength on Thursday night when the government, in order to restart its loan programme with the IMF, began implementing its directives and sharply increased the prices of petroleum products. The government raised the price of petroleum products by Rs30 per lire.
The International Monetary Fund (IMF) delayed the restart of Pakistan’s stalled $6 billion External Financing Facility (EFF) programme late Wednesday. In a statement, the Fund emphasised the elimination of subsidies on petroleum products and electricity, among other conditions, as a prerequisite for the program’s revival.
However, Nathan Porter, IMF Mission Chief for Pakistan, later stated that the Fund held constructive discussions with Pakistani officials in order to reach an agreement on policies and reforms. “The Mission has held highly constructive discussions with Pakistani authorities in order to reach an agreement on policies and reforms that would lead to the completion of the pending seventh review of the authorities’ reform programme, which is supported by an IMF Extended Fund Facility arrangement.”
During a press conference on Saturday, Finance Minister Miftah Ismail stated that rising petroleum prices strengthened the rupee and boosted the stock market.
Miftah explained that if the government had not raised POL prices, the economy would have suffered and inflation would have returned.
He stated that the Fund, which was supposed to provide $3 billion, was asked to extend the programme by one year and provide an additional $2 billion, adding that the country expected around $5 billion from the fund.
He also stated that the staff-level agreement with the IMF would be signed next month (June).
Miftah stated that the programme with the Fund is important not only because the country receives funds from the Fund, but also because it opens doors to receiving funds from other multilateral organisations such as the World Bank and the Asian Development Bank.
He stated that once unlocked by the IMF, Pakistan would receive funds from multilateral organisations, adding that around $8.9 billion was already in the pipeline from the World Bank.