• 4.2 percent rise is the highest single-day appreciation of PKR in both absolute and percentage terms since 1999

RECORDER REPORT

KARACHI: Pakistani rupee witnessed a massive recovery against the US dollar on Wednesday, the largest single day increase in years, to close at 228.8. This highly significant recovery in the inter-bank market comes after the International Monetary Fund’s (IMF) statement that Pakistan has managed to meet all pre-conditions for disbursement of the next tranche of its bailout programme.

Additionally, pressure due to import payments subsided, while Pakistan also reported a much narrower trade deficit for July, taking off some pressure on the currency that saw its worst monthly performance in over 50 years in July.

At the end of the session, the rupee closed at 228.8, an appreciation of Rs9.58 or 4.19% against the greenback, according to the State Bank of Pakistan (SBP). On Tuesday, the rupee had settled at 238.38.

In intra-day trading on Wednesday, the currency had dropped as low as 226.49.

A day ago, the IMF stated that Pakistan has met all prior conditions for the combined 7th and 8th review under the Extended Fund Facility (EFF).

“With the increase in petroleum development levy (PDL), Pakistan has completed the last prior action for the combined seventh and eighth review,” said the IMF, adding that the board meeting is tentatively planned for late August once adequate financing assurances are confirmed.

After the Board’s approval, Pakistan will receive around $1.177 billion.

“By the end of August, it is expected that Pakistan will get a $1.2 billion tranche under the EFF programme as all prior actions are met,” said Trust Securities and Brokerage Limited in a note on Wednesday.

“Hence, it is expected that the market is likely to consolidate.

“The relative consolidation is also expected in forex markets after a continued drop in imports and anticipated correction in demand going forward, subject to the revival of the IMF programme and relative political clarity,” it added.

Tahir Abbas, Head of Research at Arif Habib Limited (AHL), told Business Recorder that the pressure of import payments had subsided, leading to a drop in demand for the dollar.

“This is a supply-demand phenomenon as the demand for dollars has reduced amid a drop in import payments, whereas exporters too, are releasing their proceeds, leading to improvement in inflows,” said Abbas.

He said the appreciation momentum could continue in the coming days as well, as government measures to curb the import of bill have resulted in positivity. “Rupee may appreciate to 205-210 in this month,” he added.

Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said the development comes as the “central bank took measures to curb speculation”.

“The government and the central bank have taken initiatives to curb smuggling, which is bearing fruit,” Paracha told Business Recorder. “Meanwhile, oil and edible oil imports have also declined, which takes pressure off the currency.”

Paracha said the market could see further improvement after the IMF’s disbursement.

Reuters adds: Pakistan’s rupee gained 4.2% against the US dollar at Wednesday’s closing, central bank data showed, the largest single-day rise in years for a currency that has taken a battering in recent weeks on the back of an economic crisis.

The rupee closed at 228.80 to the dollar, up from 238.38 a day earlier, the central bank said, a day after the International Monetary Fund said Pakistan had cleared all prior actions needed to unlock much-needed bailout money.

“It is the highest appreciation of rupee in both absolute and percentage terms since 1999, according to central bank data,” Fahad Rauf, head of research at Ismail Iqbal Securities told Reuters.

On July 28, rupee fell to its lowest level against the dollar, closing at 239.94.

After two weeks of battering against the dollar, the rupee started to stage a recovery from Friday, gaining its value by 4.7% till Tuesday.

“Rupee recovering after lower-than-expected important economic numbers and IMF confirmation that all conditions have been met by Pakistan,” Mohammad Sohail, CEO at Topline Securities, told Reuters.

According to the latest numbers released by Pakistan Bureau of Statistics, Pakistan’s trade deficit was $2.6 billion in July, down 18% from a year ago and down 47% from June.

Imports fell 13% from a year ago and 38% from June to $4.8 billion, the lowest level since December 2020.

On Tuesday, Pakistan got the green light from the IMF for the release of $1.1 billion of bailout funds after certain conditions were met.

The last condition was an increase in the petroleum development levy on July 31, the IMF’s Esther Perez Ruiz told Reuters.

She said the meeting of the IMF board to release the bailout funds for Pakistan was tentatively planned for late August once adequate financing assurances were confirmed by Pakistan.

Reserves have dropped to dangerous levels of $8.5 billion, covering less than two months of imports.

Open-market

movement

In the open market, the PKR gained 11.50 rupees for both buying and selling against USD, closing at 227 and 229, respectively.

Against Euro, the PKR gained 18 rupees for buying and 17.80 rupees for selling, closing at 226 and 228 respectively.

Against UAE Dirham, the PKR gained 3.50 rupees for both buying and selling, closing at 61.50 and 62, respectively.

Against Saudi Riyal, the PKR gained 3 rupees for both buying and selling, closing at 60 and 60.50, respectively.