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Rupee puts major dent in dollar on renewed bailout bets

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  • Rupee gains as investors hope inflows to bolster dollar reserves.
  • Analysts see rupee resilient if funding ensured down the line.
  • Saudi confirmation for inflows strengthens IMF bailout hopes. 

Rupee on Thursday turned tables on the US dollar, strengthening by over a percent in inter-bank trade, as hopes for the revival of the International Monetary Fund (IMF) bailout flared up after Saudi Arabia confirmed to the multilateral lender of its financial assistance to Pakistan.

The local unit, in the interbank market, closed at 284.42 against the US dollar, up 1.2% or Rs3.43 from Wednesday’s close of 287.85, according to the State Bank of Pakistan (SBP). 

Analysts termed this recovery, which came a day after the rupee hit a new record low of 287.85 in the inter-bank market after a decline of Re.56 or 0.19%, as a positive development and see local currency resilient in days to come if inflows ensured.

The IMF has conveyed to Pakistan that it has received confirmation from Saudi Arabia on $2 billion in additional deposits, rekindling hopes of an early signing of the agreement.

Islamabad has been negotiating with the IMF since the end of January for the release of $1.1 billion from a $6.5 billion bailout package agreed upon in 2019. To unlock the funding, the government has cut back on subsidies, removed an artificial cap on the exchange rate, added taxes and raised fuel prices.

However, assurances from friendly nations for additional funds have delayed the agreement.

Sources confirmed to The News that the lender had informed the Pakistani authorities about the development and the Fund staff seemed largely satisfied with the latest confirmation. 

“Now all eyes are focused on the UAE for getting confirmation on another $1 billion deposit from them, which may pave the way for striking the staff-level agreement (SLA) with the IMF,” the sources said.

Finance Minister Ishaq Dar is likely to visit UAE on his way to the US where he is expected to hold talks on the release of funds.

Worldwide, the US dollar gained slightly on Thursday but hasn’t strayed too far from a recent two-month low as traders weighed how pivotal US jobs data coming out during a holiday weekend will impact Federal Reserve policy.

The list of soft economic data has added to fears of an impending recession in the world’s largest economy, putting a lid on risk appetite and sending traders in search of some safe-haven assets.

It should be noted that the foreign exchange reserves held by the SBP stand at a critical level of $4.2 billion — barely enough to cover one month’s imports.

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Significant surge in the price of gold in Pakistan

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On Friday, the price of gold in Pakistan continued to increase.

According to the All-Pakistan Gems and Jewellers Sarafa Association, the price of 24-karat gold per tola has risen by Rs2,200, reaching Rs249,000.

The price of 10-gram 24-karat gold increased by Rs1,886, reaching a total of Rs213,477. On Thursday, the cost of 10 grammes of 22-karat gold was Rs195,687.

The global gold market likewise had a rising trajectory. As per APGJSA, the worldwide rate was $2,404 per ounce, showing a decline of $24 during the course of the trading day.

The local market witnessed constant silver prices at Rs2,900 per tola.

Market observers attribute the increase in gold prices to other variables, such as volatility in the global market, currency exchange rates, and economic conditions. The ongoing surge in gold prices is likely to impact investment choices and consumer behaviour in the near future.

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Gold prices in Pakistan have risen by Rs 1,200 per tola.

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The price of one tola of 24 carat gold rose by Rs1,200 and reached Rs246,800 on Thursday, compared to its previous sale price of Rs245,600 on the last trading day.

According to the All Sindh Sarafa Jewellers Association, the cost of 10 grammes of 24 karat gold rose by Rs1,029 to reach Rs211,591, compared to the previous price of Rs210,562. Similarly, the price of 10 grammes of 22 carat gold jumped from Rs193,016 to Rs193,959.

The price of silver remained unchanged at Rs2,900 per tola and Rs2,486.28 per ten grammes.

According to the association, the international market price of gold rose by $10, reaching $2,382 from $2,372.

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The federal government has declared wage and pension increments for its employees.

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The Ministry of Finance has formally declared a rise in the remuneration and retirement benefits of personnel working for the federal government, offering substantial economic alleviation.

According to the notification, personnel in grades 1 to 16 will experience a 25% increment in their salaries, while officials in grades 17 to 22 will be granted a 20% rise. The implementation of this modification will commence on July 1, 2024, and will be applicable to the employees’ fundamental remuneration.

In addition, retired federal government employees would receive a 15% rise in their pension payments. This increase is applicable to retirees from both the civilian and military sectors. It is important to mention that employees who retire on or after July 1, 2024, will also qualify for this pension rise.

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The 15% increase in pension will be computed based on the amount of pension received by retired employees after deductions. Nevertheless, the letter specifies that ad hoc aid will not be factored into the calculations for pension and gratuity.

Moreover, this increment will have no effect on the calculation of housing rent allowances for employees.

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