Karachi, July 12, 2024 – The Pakistani Rupee regained 21 paisas against the US dollar on Friday, buoyed by optimism surrounding a new loan program from the International Monetary Fund (IMF).
The rupee closed at PKR 278.40 compared to the previous day’s closing of PKR 278.61 in the interbank foreign exchange market.
Currency experts attributed this recovery in rupee value to the recent statements by Finance Minister Mohammad Aurangzeb regarding the new IMF loan program. Aurangzeb announced that the size of the Extended Fund Facility (EFF) from the IMF would be revealed within a week. He expressed hope that the new loan program, estimated to be between $6 billion and $8 billion, would be approved by the end of the month.
This announcement has fueled market optimism, leading to a strengthening of the rupee. The anticipation of the IMF loan program is seen as a positive development for Pakistan’s economy, which has been struggling with balance of payment issues and dwindling foreign reserves.
In addition to the IMF-related optimism, the appreciation of the rupee was also supported by improvements in Pakistan’s foreign exchange reserves and a significant inflow of workers’ remittances for the fiscal year 2023-24.
The State Bank of Pakistan (SBP) reported a notable increase of $72 million in the country’s weekly foreign exchange reserves. As of July 5, 2024, Pakistan’s foreign exchange reserves reached $14.645 billion, up from $14.573 billion the previous week. This positive trend in reserves is a promising indicator of the country’s economic stability.
Breaking down the reserves, the official foreign exchange reserves held by the SBP saw an uptick of $15 million. As of July 5, 2024, the SBP’s reserves stood at $9.405 billion, compared to $9.39 billion the previous week. This modest increase reflects a stable inflow of foreign currency, bolstering the central bank’s capacity to manage external financial obligations.
Further supporting the rupee’s recovery was the substantial inflow of workers’ remittances. According to a report by the SBP released on Tuesday, Pakistan received $30.25 billion in workers’ remittances during the fiscal year 2023-24, marking an 11 percent increase from the $27.33 billion received in the preceding fiscal year. This increase in remittances has provided a critical buffer for the country’s foreign exchange reserves and has positively impacted the exchange rate.
Overall, the combination of the IMF loan optimism, improved foreign exchange reserves, and robust remittance inflows has contributed to the rupee’s recovery against the dollar. The coming weeks will be crucial as markets await the finalization of the IMF loan program, which is expected to provide much-needed support to Pakistan’s economy.