A day after finance minister Miftah Ismail’s announcement of the agreement of $2.3 billion loan from Chinese banks consortium, the Pakistani rupee showed a sharp recovery by Rs4.7 on Thursday morning in the interbank market. According to the State Bank of Pakistan, the US Dollar closed at Rs207.23 in the interbank market while the previous day’s closing was Rs211.93 against the greenback. In the last nine sessions the rupee had lost 5.39% and finally recovered 2.27% da-on-day against the dollar.
The market analysts had already predicted and they had expected that the rupee would see a correction today as it was trending at 208-209.50 against the dollar in the TOM (one-day forward) market. Since the beginning of this fiscal year (July 1, 2021) to date, the rupee has collectively dropped by a massive 31.54% (or Rs49.69) compared to the previous fiscal year’s close at Rs157.54. The rupee has remained downward for the last 13 months. It has lost 36.09% (or Rs54.96) to date, compared to the record high of Rs152.27 recorded in May 2021.
Market analysts are of the view that currency will remain buoyant in this season specially with bright chances of the revival of International Monetary Fund (IMF) programme as dollar inflow is dependent on IMF into Pakistan, the fall in the international crude oil prices and the expected launch of Sukuk by the government. These factors keep us optimistic for the currency correction.
Samiullah Tariq, Pakistan-Kuwait Investment Company Head of Research commented, “I think the rupee-dollar parity should improve as the IMF deal along with the Chinese deposit should improve sentiment in the currency market.”
Pakistan and the IMF accomplished progress in striking an agreement on the spending plan measures for the fiscal year 2022-23 and the last option will share a draft update of economics and financial strategies (MEFP) very soon. The government is additionally anticipating that the multilateral loan specialist should expand the size and span of the $6 billion Extended Fund Facility.
Miftah Ismail on his official Twitter handle announced regarding their agreement with China, “The Chinese consortium of banks has today signed the RMB 15 billion (~$2.3 billion) loan facility agreement after it was signed by the Pakistani side yesterday. Inflow is expected within a couple of days. We thank the Chinese government for facilitating this transaction.” No within few days the country is likely to receive inflows as Pakistan has signed $2.3 billion loan facility agreement.
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Hopefully the economic situation will become better as these inflows will boost foreign currency reserves and the rupee. But this improvement in currency could be temporary if there would be any further delay in IMF programme.