Pakistani Rupee (PKR) significantly rebounded against the dollar on Thursday and regained PKR 3.43 against due to hopes of inflows from the International Monetary Fund (IMF).
The exchange rate witnessed gain of PKR 3.43 in rupee value to end at PKR 284.42 to the dollar from previous day’s closing of PKR 287.85, the lowest level of the local currency, in the interbank foreign exchange market.
READ MORE: Rupee hits fresh low at PKR 287.85 to dollar amid IMF inflow uncertainty
The rupee was under immense pressure during the ongoing week due to uncertainty about the deal with the IMF for inflows of $1.2 billion under Extended Fund Facility (EFF).
However, the latest regain in rupee value may be attributed to positive news from friendly countries, which reportedly agreed to provide guarantee to Pakistan – a condition of the IMF.
The recent decline in rupee value has been attributed to a delay in the IMF loan program and a decrease in foreign exchange reserves, which have fallen to $9.816 billion as of March 24, 2023, down $323 million from the previous week’s $10.139 billion.
READ MORE: Rupee crashes to historic low at PKR 287.29 against dollar
This decline is significant considering that Pakistan’s foreign exchange reserves had reached a record high of $27.228 billion on August 27, 2021, before declining by $17.412 billion.
Despite the decrease, Pakistan’s State Bank’s official reserves still provide nearly one month’s import cover, although it ideally should maintain reserves equivalent to three months’ worth of import payments.
The decrease in the value of the PKR can be attributed to economic challenges, political uncertainties, and depleting foreign exchange reserves. Although the PKR had strengthened against the dollar due to a significant contraction in the current account deficit, a lack of inflows has put pressure on the currency.
Official data showed that exports fell by 8.65% and workers’ remittances dropped by 11% during the first eight months (July-February) of 2022/2023.
READ MORE: Rupee ends near all-time low against dollar at PKR 285.04
Pakistan has been facing a foreign exchange crisis due to a decrease in foreign exchange reserves, a widening current account deficit, and delays in obtaining loans from international organizations such as the IMF.
The country’s efforts to reduce the current account deficit have been hampered by a decrease in exports and workers’ remittances. In an attempt to address the crisis, Pakistan has been seeking loans and financial assistance from international organizations such as the IMF.
READ MORE: PKR slips by 13 paisas to dollar on falling forex reserves
However, delays in obtaining these loans have prolonged the crisis, and the country continues to face challenges in managing its foreign exchange reserves and stabilizing the value of its currency.
