As Pakistan nervously awaits an IMF agreement, the US dollar falls sharply against the Pakistani rupee

As the Pakistani financial market places its hopes in assurances given by Finance Minister Ishaq Dar that a long-stalled deal with the International Monetary Fund (IMF) will be reached by next week, the US dollar fell sharply against the rupee on Friday morning, the day after the local currency fell sharply — by nearly Rs19 — in the interbank market. According to the Exchange Companies Association of Pakistan (ECAP), as of 11:47 am, the local currency rose by Rs9.91 in intraday trade on the interbank market and was observed trading at Rs275.18 against the dollar.

Due to fears over a stalled deal with the International Monetary Fund and the central bank's review of its monetary policy, the rupee had fallen by nearly Rs19 versus the US dollar on Thursday (IMF). According to the State Bank of Pakistan (SBP), the rupee dropped by 18.98 or 6.66% to end the day at 285.09 versus the dollar in the interbank market, down from Wednesday's finish of Rs266.11.

The IMF advised Pakistan to trade the dollar at the rate it was being traded for close to the Afghan border, according to ECAP General Secretary Zafar Paracha, who listed a few other causes for the dollar's devaluation. "In other words, the IMF had suggested that our true rate should be the grey market rate rather than the interbank rate or the open market," he continued.

The negotiations were ready to conclude when Pakistan's Finance Minister, Ishaq Dar, promised that the country will reach a staff-level deal with the Washington-based lender next week. The economy is moving in the correct path, according to the finance minister, who took over in September of last year after Miftah Ismail was fired. He also accused miscreants of spreading false information about Pakistan's potential default.

The finance minister had noted that the SLA with the Fund should be signed by the end of next week as the negotiations with the IMF are about to come to a close. He stated, "All economic indices are gradually heading precisely. Since early February, local government officials have been negotiating with the IMF about policy framework issues to sign the SLA, which will open the door for additional funding from other bilateral and multilateral lenders.

The coalition government has already implemented several steps, such as adopting a market-based exchange rate, raising fuel and electricity prices, eliminating subsidies, and increasing taxation to raise money to close the fiscal deficit.