Business

Pakistan-IMF deal: PKR expected to remain steady next week

Published

10 months ago

Farwa

Positive impact of Pakistan-IMF deal on rupee.
Dealers expect balanced inflow, outflow of dollars.
IMF board to meet on July 12 for loan approval.

KARACHI: The rupee is expected to remain steady next week as the currency market hopes for the approval of Pakistan’s bailout package by the International Monetary Fund’s (IMF) Executive Board on July 12.

According to a report published in The News, dealers said on Saturday that dollar inflows and outflows are likely to be balanced.

In the interbank market, the local unit rose by 2.8% or Rs8 week-on-week.

“Over the course of the next week, the rupee is probably not going change much. The quantity of foreign currency that banks generate (via exports and remittances) must equal the amount of import payments before releasing them,” said an analyst.

“By using this strategy, the current account deficit is kept under check, and unrestricted imports are avoided,” the expert noted, adding that the State Bank of Pakistan (SBP) seemed to monitor the current account actively.

Once inflows from the IMF and friendly nations are received, it is feasible that imports may be permitted more freely.

However, according to the analyst, because payments are increasingly being accepted, businesses are not encountering substantial import delays.

Currency experts hope that the IMF will most likely approve the standby arrangement during its Executive Board meeting on July 12 and that $1.1 billion will be credited to the SBP account by July 18.

Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan, the key opposition figure in Pakistan and a former prime minister, met the IMF team on Friday at his residence in Zaman Park, Lahore.

Khan voiced his support for the bailout deal with the global lender but sought guarantees for timely elections in the country.

The IMF stated that it was seeking the backing of Pakistan’s political parties, including Khan’s, for the new nine-month $3 billion stand-by arrangement and the policies linked with the programme in the run-up to the country’s autumn elections.

“The market does not expect any drastic movement in USD-PKR parity,” said Tresmark — a financial portal for treasury markets — in a note.

“Our last week’s projections of 275-280 till IMF approval and 282-287 post-IMF approval still hold,” it added.

The views were based on potentially significant inflows catalysed by the IMF agreement, the rupee being undervalued on a REER basis, elevated interest rates, continued management of imports, increased forex reserves on account of favourable current account deficit, and SBP’s key objective to build reserves rapidly.

Pakistan’s foreign exchange reserves held by the central bank increased by $393 million to $4.462 billion in the week ending June 30.

The country’s dollar bonds saw a correction during the outgoing week. Following the positive response to the Pakistan-IMF agreement, the country experienced a significant upswing in its international bond prices, reflecting heightened investor confidence, according to JS Global.

“However, there has been a correction in bond prices and yields this week,” it said. “Bond prices are showing on average a 7% day-on-day decline as per current prices.”

On a cumulative basis, the increase in international bond prices averaged around 26% since the recent low of June 23, 2023, JS Global stated.

Business

Pakistan’s $1.1 billion loan tranche is approved by the IMF board.

Published

2 days ago

Farwa

The cash is the third and last installment of a $3 billion standby agreement with the international lender that it obtained to prevent a sovereign default last year and that expires this month.

Following the discussion of Pakistan’s request for the release of funds at today’s IMF Executive Board meeting in Washington, the final tranche was authorized.

Pakistan and the International Monetary Fund (IMF) came to a staff-level agreement last month about the last assessment of a $3 billion loan package.

The total amount of $1.9 billion that the nation has received thus far is divided into two tranches: $1.2 billion in July and $700 million in January 2024.

According to Finance Minister Muhammad Aurangzeb, Islamabad could have a staff-level agreement on the new program by early July. Pakistan is asking the IMF for a fresh, longer-term loan.

In order to support macroeconomic stability and carry out long-overdue and difficult structural changes, Islamabad says it is seeking a loan for a minimum of three years; however, Aurangzeb has reluctant to specify the specific program in question. If approved, it would be Pakistan’s 24th IMF bailout.

See Also: Pakistan formally requests new IMF assistance

The event transpired on the day following Prime Minister Shehbaz Sharif’s meeting with IMF Managing Director Kristalina Georgieva, during which he reaffirmed the government’s resolve to restart Pakistan’s economy.

During the meeting held in conjunction with the World Economic Forum Special Meeting, the prime minister announced that he had given his finance minister, Muhammad Aurangzeb, strict instructions to implement structural reforms, maintain strict fiscal discipline, and pursue prudent policies that would guarantee macroeconomic stability and continuous economic growth.

Georgieva was commended by him for helping Pakistan obtain the $3 billion Standby Arrangement (SBA) from the IMF last year, which was about to be finalized.

Business

Macroeconomic circumstances in Pakistan have improved.

Published

2 days ago

Farwa

By virtue of the Board’s resolution, SDR 828 million, or roughly $1.1 billion, can be disbursed immediately, increasing the total amount disbursed under the arrangement to SDR 2.250 billion, or roughly $3 billion.

After being adopted by the Executive Board on July 12, 2023, Pakistan’s nine-month SBA effectively served as a framework for financial support from both bilateral and multilateral partners, as well as a policy anchor to resolve imbalances both domestically and internationally.

According to the official announcement from the IMF, Pakistan’s macroeconomic conditions have improved during the program. Given the ongoing recovery in the second half of the fiscal year, growth of two percent is anticipated in FY24.

With a primary surplus of 1.8 percent of GDP in the first half of the fiscal year 2024—well ahead of expectations and putting Pakistan on track to meet its target primary surplus of 0.4 percent of GDP by the end of the fiscal year—the country’s fiscal condition is still strengthening.

Even while it is still high, inflation is still falling and should end up at about 20 percent by the end of June if data-driven and adequately tight monetary policy is continued.

In contrast to 11.4 per cent last year, the IMF predicted in an official statement that Pakistan’s tax collection and grants will stay at 12.5% of GDP in FY2024.

After remaining at 7.8% of GDP in FY2023, the deficit is predicted to stay at 7.5% of GDP in FY2024.

Business

Pakistan’s fuel prices should drop.

Published

2 days ago

Farwa

At 0423 GMT, U.S. West Texas Intermediate crude prices fell 13 cents, or 0.16%, to $82.50 a barrel, while Brent crude futures were down 10 cents, or 0.11%, to $88.30 a barrel.

Both benchmarks’ front-month contracts saw losses of over 1% on Monday.

on line with the worldwide trend, the price of gasoline is anticipated to decrease by Rs. 5.4 per liter on the local market. In the same way, buyers in the Pakistani market may see a drop in the price of diesel of Rs8 a litre.

Additionally, it is anticipated that the prices of light fuel and kerosene will decrease by Rs5.40 and Rs8.3 per liter, respectively.

The finance ministry will receive a summary from the Oil and Gas Regulatory Authority (OGRA), and PM Shehbaz Sharif will be consulted before a final decision is made today.

The federal government raised the cost of gasoline by Rs. 4.53 per liter and diesel by Rs. 8.14 per liter at the most recent review.

At the moment, the price of gasoline was Rs 293.94 per liter, while the price of high-speed diesel was Rs 290.38 per liter.