Islamabad, November 10, 2023 (PAKONOMY): The International Monetary Fund (IMF) is deeply troubled by the frequent devaluations of the Pakistani Rupee (PKR) against the US Dollar. This volatility poses significant risks to the country’s economic stability.
The IMF’s unease stems from the supply-demand imbalance, leading to a continuous devaluation of the PKR. As a response, the organization is considering attaching additional conditions to the release of the second tranche of $710 million under the $3 billion Standby Arrangement (SBA). The urgency to address this issue is heightened as the nine-month SBA is set to conclude in March 2024.
Atif Ahmed, a senior banker and currency expert, sheds light on potential solutions. He anticipates a rise in export proceeds in the coming weeks, contingent on favorable market conditions. However, challenges arise from a tight supply and sellers’ reluctance, emphasizing the intricacies of the exchange rate trend.
Examining the State Bank of Pakistan’s recent report, the dollar’s closing price of Rs286.90 sets the stage. Some banks, however, sell dollars at higher prices without adhering to the central bank’s set figure. This discrepancy indicates a potential future exchange rate trend that necessitates attention. The consensus is that without balancing the supply and demand for dollars, the devaluation of the PKR may persist.
The economic landscape is further complicated by discouraging reports on remittances and export proceeds. A 20% decline in remittances during the first quarter of the current fiscal year raises concerns. Simultaneously, stagnant export growth implies a potential decline in proceeds for the fiscal year. Bankers emphasize the challenges faced by exporters amid high inflation rates and steep interest rates, advocating for a more conducive economic environment.
Addressing the IMF’s concerns becomes imperative for Pakistan’s economic resilience. Striking a balance in the currency market, fostering growth in remittances and exports, and creating a business-friendly environment are crucial steps. The effectiveness of measures taken to address these pressing issues will shape the economic trajectory in the coming months.