Karachi, November 20, 2023 – The Pakistani Rupee (PKR) showcased resilience on Monday, gaining 56 paisas against the US dollar, closing at PKR 285.97 in the interbank foreign exchange market.
This positive momentum is attributed to increased dollar sales by exporters and encouraging economic indicators following the recent agreement with the International Monetary Fund (IMF) for the next tranche of loans.
The exchange rate marked a significant improvement from last Friday’s closing of PKR 286.50, reflecting a 0.36 percent recovery over the past week after a challenging 17-day losing streak. The interbank market saw a notable ascent from PKR 287.55 on Monday to PKR 286.50 on November 17, signaling a turnaround in market sentiment.
Analysts credit the optimistic outlook to the positive response generated by the IMF review and subsequent staff-level agreement. This development boosted investor confidence in the country’s economy, leading to a resurgence in market inflows. Exporters, anticipating further rupee appreciation, are reentering the market, contributing to improved supplies and a positive economic outlook.
A key contributor to this positive trend is the staff-level agreement reached on Wednesday during the first review under Pakistan’s stand-by arrangement with the IMF. Pending approval by the IMF’s executive board, this agreement is expected to bring approximately $700 million to Pakistan, bringing total disbursements under the stand-by arrangement to nearly $1.9 billion.
Government officials, including the caretaker prime minister, interim finance minister, and the governor of the State Bank of Pakistan, expressed optimism in response to the staff-level agreement. However, reports surfaced regarding market tactics aimed at depreciating the local currency, including the postponement of import payments, restrictions on new letters of credit issuance, and intensified oversight in market trading.
Despite these challenges, exporters have resumed selling forwards, with forward premiums experiencing a 30 percent decline. One- and three-month premiums closed the week at 190 and 430 paisa, respectively.
Market estimates now indicate that the Rupee is likely to strengthen further, potentially reaching around 282 against the US dollar. In anticipation of this, the State Bank of Pakistan is expected to resume its dollar buying. Positive developments, such as multilateral lending and approvals from the IMF’s executive board, are anticipated to sustain the Rupee’s upward trajectory.
