KARACHI: After the market’s excitement over the restart of the International Monetary Fund (IMF) program subsided on Friday, the US dollar once more soared past the 210-rupee threshold in the interbank market.
The dollar appreciated by 0.55 percent to close at Rs210.95 against the Pakistani rupee in the interbank market, according to information provided by the State Bank of Pakistan (SBP).
After Pakistan and the Fund reached a staff-level agreement the day before, the rupee made a small recovery against the dollar, closing at 209.80, according to the central bank.
There is still time before Islamabad receives the $1.17 billion loan because the disbursement is still pending IMF Executive Board approval.
According to AA Commodities Director Adnan Agar, the market feels that Pakistan’s $1.17 billion IMF loan tranche is “insufficient.”
Investors are closely monitoring global oil prices in the hopes that a decline in these costs will help save the nation’s economy, the official said.
The analyst did, however, add that Pakistan would benefit if oil prices fell to between $60 and $70 per barrel on the international market, though this appears challenging given that Brent crude is falling as a result of calls for a global recession. “Oil prices will rebound once this passes,”
IMF
The International Monetary Fund (IMF) announced on Thursday that it had reached an agreement with Pakistan to restart a loan program that had been put on hold. The $1.17 billion loan will help Pakistan’s ailing economy.
According to an IMF statement, a “staff level agreement” will increase the amount distributed under an extended fund facility (EFF) to $4.2 billion, with the potential to rise to $7 billion and last until June of the following year. This agreement is still subject to board approval.
Imran Khan, a former prime minister, signed a $6 billion bailout package in 2019, but it repeatedly stalled because of his administration’s violation of subsidy agreements and poor tax collection.
The new agreement comes after Shehbaz Sharif‘s administration, which took office in April and has effectively eliminated fuel subsidies and introduced new measures to broaden the tax base, spent months making extremely unpopular budget cuts.
The IMF team’s leader, Nathan Porter, stated in a statement that “Pakistan is at a challenging economic juncture” and added that both external factors and domestic policies were to blame.
To satisfy the demands of international financial institutions, the new government has drastically reduced the number of subsidies, but by doing so, it runs the risk of angering the electorate, which is already suffering from double-digit inflation.
Khan was overthrown by a parliamentary no-confidence vote, and a new coalition government took office after that. The coalition has promised to make the difficult choices necessary to revive the economy.
The price of electricity has increased, effectively ending the subsidies introduced by Khan, and three fuel price increases totaling a cumulative 50 percent have been imposed by Prime Minister Shehbaz in an effort to secure the IMF loan.
Islamabad has already received $3 billion from the program, but officials requested an extension until June 2023 because the facility is set to close later this year.
The agreement required “a lot of hard work,” according to development economist Maha Rahman.
“It was necessary to make difficult choices that will have a domino effect on inflation and purchasing power. However, it is a relief that the decision has been made
Rahman acknowledged that despite this, it is one of those difficult pills to swallow that one wishes one didn’t have to.
To start weaning Pakistan off the IMF and other external assistance, she said, “We need to start developing domestic productivity.”
