KARACHI: The Pakistan Rupee (PKR) made sharp recovery of Rs1.07 against the dollar on Tuesday amid expectation of $2 billion inflows from the International Monetary Fund (IMF).
The exchange rate ended at Rs206.87 to the dollar from previous day’s closing of Rs207.94 in the interbank foreign exchange market.
Prime Minister Shehbaz Sharif earlier in the day said that a significant amount was expected from the IMF.
“Miftah Ismail [the finance minister] sent a message this morning saying that Pakistan will receive not $1 billion but $2 billion from the IMF. I told him in response, Alhamdulillah, but our ultimate goal is self-reliance,” the prime minister said.
The prime minister announced shortly after Ismail confirmed Pakistan had received the Memorandum of Economic and Financial Policies (MEFP) from the IMF for the seventh and eighth reviews.
The rupee was remained under pressure due to high import payments and falling foreign exchange reserves. Recently, Pakistan received about $2.3 billion from China.
The rupee fell to the all-time low at Rs211.93 to the dollar on June 22, 2022.
The official foreign exchange reserves of State Bank of Pakistan (SBP) have decreased around 32-month low at $8.238 billion by week ended June 17, 2022. The official reserves of the central bank fell by $747 million to $8.238 billion by week ended June 17, 2022 as compared with $8.985 billion by week ended June 10, 2022.
Previously, the foreign exchange reserves of the SBP were seen on November 01, 2019 when those were at $8.358 billion.
Considering the current official reserves of the State Bank at $8.238 billion, the import cover is only for 1.21 months.
The central bank attributed the decline in foreign exchange reserves for external debt repayments. However, SBP reserves are expected to increase in coming days on realization of proceeds of China Development Bank (CDB) loan.
The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since touching the peak the central bank’s foreign exchange witnessed a continuous decline. The official reserves of the SBP fell around $11.91 billion by week ended June 17, 2022 from touching the peak on August 27, 2021.
The total foreign exchange reserves of Pakistan have declined to around three-year low at $14.21 billion by week ended June 17, 2022. Previously, the foreign exchange reserves of the country were seen at $14.259 billion by week ended July 5, 2019. The country’s foreign exchange reserves have fallen by $733 million to $14.21 billion by week ended June 17, 2022 as compared with $14.943 billion a week ago i.e. June 10, 2022.
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 $13.018 billion.
The rupee remained under pressure against the greenback during the current fiscal year. The State Bank of Pakistan (SBP) has taken various measures to support balance of payment and the local currency. However, the measures ended in a failure to help the rupee to recover losses.
The SBP on May 23, 2022 announced a sharp increase in policy rate by 150 basis points to 13.75 per cent from 12.25 per cent.
Recently the government announced a complete ban on imports to support balance of payment and help the rupee to stabilize. But all these measures appeared in failure as the exchange rate yet again deteriorated today massively.