Tresmark said he expects the rupee to hover around Rs 278 and the market is not expecting any significant appreciation.
- The rupee is likely to remain stable in the short to medium term.
- The local currency closed at 278.4 against the dollar on Friday.
- The rupee-dollar exchange rate is stable just below 280.
KARACHI: Analysts said on Saturday they expect the Pakistani rupee to remain stable in the short to medium term after the country signed a new $7 billion loan agreement with the International Monetary Fund (IMF) to support its struggling economy and manage its growing debt.
The rupee has been stuck in a narrow range this week despite a number of positive factors. On Monday, it closed at 278.5 per dollar in the interbank market. On Friday, it closed at 278.4.
Remittances from Pakistanis working abroad rose to $3.2 billion in June, up 44 percent from a year ago. The central bank’s foreign exchange reserves have remained at $9.4 billion for the past two weeks. The rupee-to-dollar exchange rate has stabilized at just below Rs280 after hitting a peak of Rs307.5 in June 2023.
Pakistan achieved a milestone by signing a new 37-month Extended Fund Facility (EFF) with the IMF. This major achievement follows the successful conclusion of the government’s stabilization measures in April this year and the final Standby Arrangement (SBA) of $3 billion.
The agreement now requires approval by the IMF’s Executive Board.
“Containing inflation, deepening access to financing, and building strong external buffers are key to development and resilience,” the IMF said in a statement.
“Monetary policy will remain focused on supporting deflation and helping to protect real incomes, especially for the most vulnerable,” it added.
“To cushion shocks and build reserves, the State Bank of Pakistan (SBP) will maintain a flexible exchange rate and continue to improve the functioning of the foreign exchange market and transparency of foreign exchange transactions,” it said in a statement.
Arif Habib Limited said in a note that the signing of the new EFF programme marks an important and positive development that will secure and support the external sector’s prospects in the long term. “We expect the Pakistani Rupee (PKR) to stabilise in the short to medium term, driven by positive sentiment arising from the new programme,” the company said.
Tresmark believes the unexpectedly early announcement of the IMF staff-level agreement will help the rupee to stabilise further.
“These expectations are supported by rising hot money, further multilateral inflows and hopes of rising export revenues. Equity markets, already close to all-time highs, are set to rise further,” Tresmark said in his weekly report.
“However, the market expects the rupee to remain at around Rs 278 per dollar and is not expecting any significant appreciation,” he added.
Following this correction, premiums for three- to six-month contracts have risen. “We saw some futures selling by exporters last week and we expect to see significant inflows into the market next week. Exporters will find one- to three-month sales particularly attractive.”
