Sat. Feb 24th, 2024


Rupee supported by improved outlooks for external account which saw current account surplus in December

A man counts Pakistani rupee notes at a currency exchange shop in Peshawar, Pakistan September 12, 2023. — Reuters  
  • Rupee closed week at 279.90 against dollar on Friday. 
  • Currency supported by improved outlooks for external account.
  • Rupee’s stability tested by flare-up of tensions with Iran. 

KARACHI: The rupee is expected to remain steady and hover around 280 against the dollar until the general elections, said the analysts, as Pakistan-Iran tensions ease and the country received external support from UAE and IMF, The News reported Sunday.

The local currency closed the week at 279.90 on Friday by gaining slightly against the greenback in the interbank market, according to the State Bank of Pakistan (SBP).

The currency has been supported by improved outlooks for Pakistan’s external account, which saw a current account surplus of $397 million in December and received $705.6 million from the International Monetary Fund (IMF) as the second tranche of a $3 billion loan programme this week.

The United Arab Emirates (UAE) also announced that it had rolled over a $2 billion loan that was due this month for another year while foreign direct investment and information technology exports showed modest growth in the first half of the fiscal year 2023/24.

However, the rupee’s stability was tested by the flare-up of tensions with Iran over the past two days, which disrupted the forward sale of dollars by exporters, a key source of forex inflows.

“The Iran-Pakistan conflict abruptly ended the slow and steady forward sale of dollars by exporters,” said Tresmark, a financial terminal in a weekly note on Saturday.

“Even though the conflict is on the trajectory of reconciliation, it seems unlikely that there will be any resumption any time soon. Having said this, USD/PKR seems to maintain its anchor at the 280 level, at least till there is a new elected government.”

Analysts are also keenly watching the calculated escalation of hostilities against the Houthis in Yemen, and are hoping it is not intended to expand geographically, Tresmark said.

“Till now, Pakistan has bravely faced whatever is thrown at it. The sense of stability has been created much due to improved economic optics. And the way forward will also be to strengthen the economy.”

After completing the first review of Pakistan’s loan programme, the IMF stated in its country report that while there has been progress on the stand-by arrangement, sustained commitment to policy goals and reforms is essential for a sustainable economic recovery.

It also emphasised the necessity for ongoing focus on issues including exchange rate stability and power sector arrears. The economic picture is still precarious and carries a high chance of negative outcomes. Achieving debt sustainability and external stability requires a strong commitment to policy and adequate external support, according to the IMF’s report.

Reviving trading volumes and promoting interbank market activity is imperative.

The IMF also emphasised the exchange rate stability, saying that there should be no official or informal restrictions and that SBP interventions should only be used to establish forex buffers. It also reiterated Pakistan’s commitment to stepping up efforts to eliminate existing restrictions and multiple currency practice by early 2024.



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