IMF review puts pressure on rupee as Pakistan negotiates loan tranche 

The Pakistani rupee is anticipated to face continued depreciation against the US dollar in the upcoming week due to heightened demand from importers outweighing the supply from exporters, according to analysts.

The situation is further complicated by the visit of the International Monetary Fund (IMF) delegation to Pakistan for a review mission, which typically results in increased volatility for the local currency.  

The IMF’s review discussions with Pakistani authorities are expected to conclude on November 15, potentially leading to the disbursement of a second loan tranche of approximately $700 million from the IMF. 

In the past week, the rupee experienced a 1.19 per cent decline against the US dollar in the interbank market, closing at 284.31 on Friday, compared to 280.95 at the beginning of the week. Export proceeds have slowed down, impacting the availability of dollars.  

Additionally, new regulations in the forex market have limited banks’ ability to fund their nostros through buy-sell swaps, leading to higher forward premiums and challenges for importers in processing payments. 

According to The News, the rupee is expected to stabilise around 285 for the coming week, with occasional fluctuations to 288 per US dollar. A potential recovery is also anticipated once the IMF completes its review. 

Notably, there have been positive developments, such as a boost in exports to $2.7 billion in October and a decrease in consumer price index inflation from 31.4 per cent to 26.9 per cent.  

These developments, along with a decrease in the Karachi interbank offered rate, suggest that interest rates have likely peaked in the short to medium term, which has positively impacted equity markets, with the KSE Index reaching an all-time high. 

Equity traders are also optimistic about the IMF’s discussions with government stakeholders and the announcement of election dates. They are hoping for a resolution on circular debt, which has constrained many profitable companies in the index.