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Introduction:
The Pakistani currency experienced a moderate depreciation of 0.31% against the US dollar in the inter-bank market, settling at Rs277.90. Despite improvements in foreign exchange reserves, the currency continues to consolidate around current levels following the new International Monetary Fund (IMF) deal. This blog post delves into the recent fluctuations in the Pakistani currency and explores expert outlook and market trends.
Consolidation and IMF Deal:
While Pakistan’s foreign exchange reserves have seen consecutive weekly improvements, reaching $4.4 billion, the currency has displayed moderate depreciation. Market analysts believe that the rupee will continue to fluctuate as it strives to stabilize ahead of the upcoming IMF executive board meeting on July 12. The meeting will consider approving a new $3 billion loan programme for Pakistan. Following the IMF deal, the currency has experienced a net recovery of 2.91%, amounting to Rs8.09, against the US dollar.
Historical Drop and Recovery:
In the previous fiscal year ending June 30, 2023, the Pakistani currency witnessed a historic drop of 28% (Rs81) to Rs286/$. However, experts anticipate that the rupee may regain ground after the IMF disburses its first tranche of approximately $1 billion in July. Furthermore, financial institutions and friendly countries providing new financing are expected to contribute to the currency’s recovery.
Expert Projections and Debt Restructuring:
Despite the recent recovery, global securities firms project a potential depreciation of 15-25% for the Pakistani currency in fiscal year 2024. Projections suggest a range of Rs317-340/$. The country’s heavy reliance on borrowing, especially from domestic sources, has led to unsustainable levels of domestic and foreign debt. Experts highlight the need for debt restructuring during fiscal years 2024 and 2025 to address these challenges.
Conclusion:
The Pakistani currency’s recent consolidation and moderate depreciation reflect the ongoing impact of the IMF deal and efforts to stabilize ahead of the upcoming loan programme approval. While projections indicate potential future depreciation, the anticipated release of IMF funds and new financing from financial institutions and friendly countries may contribute to the currency’s recovery. It is crucial for Pakistan to address its debt levels through restructuring in the coming years to ensure sustainable economic stability.
Note: The currency exchange rates mentioned in this blog post are based on available information and should be verified with official sources and financial institutions.
