The Pakistani Rupee gained significant ground against the US Dollar on Thursday, appreciating by 57 paisas, closing at Rs167.19 from the previous day’s rate of Rs167.76 in the interbank foreign exchange market.
This surge in the rupee’s value is attributed to rising expectations of an imminent International Monetary Fund (IMF) loan disbursement to Pakistan.
According to currency experts, the rupee’s recent appreciation is largely driven by reports that the IMF is poised to release approximately $1.4 billion to Pakistan next week. The prospect of this financial support has boosted market confidence, leading to a more favorable exchange rate for the local currency.
Experts predict that the rupee may continue its upward trajectory, buoyed by reduced import payments following a drop in global oil prices. With a decreased need for foreign exchange to finance oil imports, the local currency is expected to benefit from diminished demand for the US dollar.
Pakistan’s import bill experienced a sharp decline in March 2020, falling by 21% compared to the previous month, largely due to the nationwide lockdown imposed to curb the spread of the coronavirus pandemic. According to data released by the Pakistan Bureau of Statistics (PBS), the import bill stood at $3.3 billion in March 2020, down from $4.185 billion in February 2020.
While the reduction in imports provided some relief to the country’s foreign exchange reserves, the pandemic has had a detrimental effect on Pakistan’s export performance. Exports fell by 15.56% in March 2020, amounting to $1.8 billion, compared to $2.14 billion in February 2020. The lockdown and global economic slowdown have disrupted supply chains and international demand, significantly affecting the country’s export sector.
Despite these short-term challenges, the overall trade data for the first nine months of the fiscal year (July 2019 – March 2020) reflects some positive trends. The import bill for this period contracted by 14.42%, falling to $38.81 billion from $40.68 billion in the corresponding period of the previous fiscal year.
Moreover, exports during the same period recorded a modest increase of 2.23%, rising to $17.45 billion from $17 billion in the prior fiscal year. As a result, Pakistan’s trade deficit shrank by 26.45% in the first nine months of FY2019-20, reducing to $17.36 billion compared to $23.61 billion during the same period last year.
The combination of reduced imports, stable exports, and the anticipated IMF loan disbursement is expected to provide further support to the rupee in the coming weeks.