KARACHI: Pakistani Rupee (PKR) has plunged by Rs9.43 against the US dollar since the country received tranche from the International Monetary Fund (IMF).
The country received a tranche of $1.16 billion from the IMF under Extended Fund (EFF) loan program on August 31, 2022.
The fund transfer was made possible after the IMF Executive Board approved resumption of Pakistan loan program on August 29, 2022.
READ MORE: Rupee weakens sixth straight day; dollar ends PKR 228.18
The government was hopeful of improvement in economic indicators once the money is received from the IMF.
However, in contrast the PKR fell sharply since the IMF funds transferred to the State Bank of Pakistan (SBP).
The exchange rate was Rs218.75 to the dollar on August 31, 2022, the day when the money was received by Pakistan. However, since then the rupee fell by Rs9.43 or 4.31 per cent to Rs228.18 to the dollar on September 09, 2022 in interbank foreign exchange market.
READ MORE: Pakistani Rupee weakens; Dollar jumps to PKR 225.42 at interbank
Currency experts said that the dollar demand was increased due to massive imports for flood relief program and removal of import ban on luxury and non-essential items under IMF pressure.
Pakistan is facing catastrophic floods, which incurred huge losses both human and monetary. To an estimate, the country has suffered about $12 billion – $15 billion due to floods devastation.
A large scale relief operations have been started from both local and international agencies along with the government. This relief operations require huge amount of imported goods in the country.
READ MORE: Dollar strengthens to PKR 223.42 at interbank closing
Pakistan’s apex tax agency i.e. Federal Board of Revenue (FBR) recently issued notifications to allow exemption from duty and taxes on import of goods for flood relief operations. Besides, the FBR also directed the customs authorities to ensure clearance of goods imported under PM flood relief program within 24 hours.
Furthermore, the rupee is also under pressure after the government withdrew the ban on import of luxury and non-essential goods to prevent depreciation in rupee value and cut import bill to support balance of payment.
The government imposed the ban on import of luxury and non-essential items on May 19, 2022. The ban yielded results as the trade deficit and current account deficit narrowed in subsequent months.
However, the government on August 20, 2022 removed this ban in order to satisfy the IMF for continuation of loan program.
READ MORE: Dollar continues upward journey; ends at PKR 221.42 in interbank
It is pertinent to mention that the foreign exchange reserves of the country improved after the inflows received by the State Bank. However, repayment pressure and already significant decline failed to improve the market sentiments.
Pakistan’s foreign exchange reserves have increased by $1.07 billion. The foreign exchange reserves of Pakistan increased to $14.473 billion by week ended September 02, 2022 as compared with reserves position of $13.403 billion a week ago i.e. August 26, 2022.
READ MORE: Pakistan’s FX reserves increase by $1.07bn after IMF inflows
The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $12.755 billion.
The official reserves of State Bank of Pakistan (SBP) also recorded an increase of $1.103 billion to $8.8 billion by week ended September 02, 2022 as compared with $7.697 billion a week ago.
During the week ended, SBP received US$ 1,166 million from IMF under EFF program. After accounting for external debt and other payments, SBP reserves increased by US$ 1,103 million to US$ 8,799.9 million.
The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP dropped by $11.346 billion.