Thursday, June 8, 2023

Dollar falls by 50 paise on hopes of release of IMF funds

The US dollar was seen losing ground by falling 50 paise against the rupee in the interbank market on Wednesday, with analysts linking optimism to developments around the expected release of loan tranches by the International Monetary Fund (IMF).

According to the Forex Association of Pakistan (FAP), the greenback fell by Rs 1.45 to Rs 204.55 at around 1:20 pm against Rs 206 from the previous day.

The closing rate of the previous session’s FAP reflects a difference of 87 paise to that of State Bank of Pakistan, which had recorded Rs 206.87.

The greenback was trading at Rs 205.50 in the interbank market till the closing time on Wednesday.

Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, attributed the fall in the international currency to the possibility of the IMF releasing two combined tranches of around $1.85 billion instead of the initially expected single tranche of around $1bn.

On Tuesday, Pakistan received the Memorandum of Economic and Financial Policies (MEFP) from the IMF for the joint seventh and eighth review of the $6 billion loan program with Pakistan.

The MEFP includes certain pre-actions that would be required to implement the disbursed funds before and after taking Pakistan’s case for approval by the IMF Board. According to the MEFP, Pakistan will have to take at least two more “pre-actions” by the end of July or early August to secure the two joint tranches.

Reading, Pakistan needs to do ‘more’ to double IMF payouts

Under the MEFP, prior actions include passing the federal budget agreed with the IMF and presented to the National Assembly on June 24 and an agreement duly signed by provincial governments to jointly provide a cash surplus of about Rs 750 billion to the Centre. Includes submission of a memorandum. ,

Besides, Paracha said, the signing of a $2.3 billion deal between Pakistan and a Chinese consortium of banks has also strengthened the rupee against the dollar.

Saad bin Nasser, director of Metis Global, gave similar reasons for the fall in the dollar.

“The revision in the government’s budget raises the possibility of a revival of the IMF programme. We expect an inflow of $1.9 billion from the IMF by the end of next month,” he said. don.comIt added that a $2.3bn deposit by China had also contributed to the “recovery of Rs.

“And deposits from exporters are [also] Dollar liquidity in the money market improved,” he said.

For these reasons, “we are seeing gradual stability in the exchange rate”, Nasser said.

Similarly, Tresmark’s Head of Research Komal Mansoor also pointed out that the rupee was strengthening after inflows from China and exporters “sold the dollar on the spot and aggressively”.

“Current account deficit remained higher than expected in May, but around REER (real effective exchange rate) 93, the rupee will continue to appreciate in the short term. We are expecting the market to test the 200 per dollar soon,” he said. .

Nation World News Desk
Nation World News Desk
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