Facing an increasingly acute balance of payments crisis, Pakistan is desperate to secure external financing, with less than three weeks worth of import cover in its foreign exchange reserves
Pakistan secured a $6-billion IMF bailout in 2019. It was topped up with another $1-billion last year to help the country following devastating floods, but the IMF then suspended disbursements in November due to Pakistan’s failure to make more progress on fiscal consolidation.
Wednesday’s move by foreign currency dealers, whose open market rates are different from the rate notified by the central bank, had a cascade effect on official exchange rates on Thursday. “We requested the central bank to increase the interbank to help combat the black market,” ECAP President Malik Bostan told Reuters.Aside from moving towards a market-determined exchange rate, Islamabad has also announced it will take fiscal measures recommended by the IMF.
“The depreciation in the rupee takes away some uncertainty regarding the economic road map ahead and resumption of the IMF program, which the market is responding positively to,” Tahir Abbass, Head of Research at Arif Habib Limited, said.
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