News
How Much Can Rupee Recover Against US Dollar after IMF Deal?
(CTN News) – Pakistan’s efforts to revive the International Monetary Fund (IMF) program have rekindled hopes for economic stability.
After meeting several demands of the lender and making amendments to the budget for the fiscal year 2023-24, the nation is desperate to unlock funds before the June 30 deadline for the Extended Fund Facility (EFF) agreement, initially reached in 2019, expires and pushes Pakistan towards a sovereign default.
Rupee’s Historic Low: Potential Recovery with IMF Deal Revival
The revival of the IMF deal is seen as a crucial step toward economic stability for Pakistan. Additionally, the country’s currency, the rupee, has experienced a historic drop during the outgoing year, plunging 28% to 286 against the US dollar as of June 27, 2023, compared to 204.8 on June 30, 2022.
Malik Bostan, the president of the Exchange Companies Association of Pakistan (ECAP), has expressed optimism that the rupee could recover significantly if the IMF deal is successfully revived. In a video message to the media, Bostan predicted that the rupee could strengthen to 270 against the dollar.
Nathan Porter, the IMF’s Mission Chief to Pakistan, has confirmed that discussions with Pakistani authorities are underway, aiming to quickly reach an agreement on financial support from the IMF.
Porter acknowledged the decisive measures Pakistani authorities took to align policies with the economic reform program in a statement on Tuesday.
Having hoped to receive the IMF’s decision on the program within a day or two, Pakistan is eagerly awaiting the outcome. The revival of the IMF program is anticipated to bring much-needed economic stability to the country and help address the ongoing economic turmoil.
ORIGINAL STORY: Pakistan Nears Completion Of IMF Bailout Package Amidst Budget Concerns
Pakistan is in talks with the International Monetary Fund (IMF) to secure the remaining $2.6 billion of its $6 billion bailout package, Finance Minister Ishaq Dar said on Tuesday.
Dar, who is in Washington to attend the annual meetings of the IMF and World Bank, told reporters that Pakistan had met all the performance criteria and prior actions required by the IMF for the release of the funds.
Economic Progress and Stability:
He said that Pakistan had successfully completed 12 reviews under the Extended Fund Facility (EFF) programme, which was approved by the IMF in 2019.
Dar said that the IMF had acknowledged Pakistan’s economic progress and stability, despite the challenges posed by the Covid-19 pandemic and the locust invasion.
He said that Pakistan had achieved a primary surplus of 0.5 percent of GDP in the last fiscal year, which was higher than the target of 0.4 percent.
He also said that Pakistan had reduced its fiscal deficit to 8.1 percent of GDP, which was lower than the revised target of 9.1 percent.
Structural Reforms and Resilience:
Dar said that Pakistan had also improved its current account balance, which recorded a surplus of $1.8 billion in the first two months of the current fiscal year.
He said that Pakistan’s foreign exchange reserves had increased to $20.4 billion, which was sufficient to cover more than three months of imports.
He said that Pakistan’s economic growth rate was expected to rebound to 4 per cent in the current fiscal year, after contracting by 0.4 per cent in the last fiscal year due to the pandemic.
Dar said that Pakistan was committed to implementing structural reforms to enhance its economic resilience and competitiveness.
IMF Concerns and Budget Revisions:
He said that Pakistan was improving its tax administration and policy, strengthening its social safety nets, expanding its energy sector, and promoting private sector development.
He said Pakistan was also pursuing regional integration and trade facilitation, especially with its neighbors.
Dar said that Pakistan appreciated the support and cooperation of the IMF and other development partners in its economic recovery and reform efforts.
He hoped that the IMF would soon approve releasing the remaining $2.6 billion of the bailout package, which would help Pakistan meet its external financing needs and boost its confidence in the international markets.
Ongoing Negotiations and Expected Approval:
The IMF had several concerns with Pakistan’s budget for the upcoming fiscal year 2024 earlier this month, claiming that several of the proposed policies violated the terms of the EFF program.
Before its board decides whether to release the pending tranche, Esther Perez Ruiz, the IMF representative for Pakistan, had previously stated that Pakistan needs to satisfy the IMF on three counts, including the budget for the upcoming fiscal year.
In response to the IMF’s worries, the administration stated that it was “flexible” regarding the budget and that it was still working with the lender to find a “amicable solution”.
In an effort to obtain crucial funding, the administration subsequently announced various revisions to the budget for the upcoming fiscal year last week.
These changes included budgetary tightening measures that the IMF mandated.
During a National Assembly session on Saturday, when he presented the amendments, Finance Minister Ishaq Dar had said, “Pakistan and IMF had detailed negotiations for the last three days as a last effort to complete the pending review.”
The adjustments include the removal of an amnesty on foreign exchange inflows, the lifting of import restrictions, the addition of Rs215 billion in new tax measures.
Rs85 billion in budget cuts, an increase of Rs16 billion in Benazir Income Support Programme allocations, and the authority to raise the fuel charge from Rs50 to Rs60 per liter.
Following the Parliament’s approval, Acting President Sadiq Sanjrani signed the revised budget into law.
IMF Plan:
In the meantime, PM Shehbaz spoke on the phone today and held back-to-back talks with the IMF director in Paris last week.
According to a handout issued by the Prime Minister’s Office (PMO) today, the premier and the head of the international lender spoke about the IMF plan.
And the IMF director general commended the finance minister and his team’s efforts to see the programme through to completion.
According to the statement, PM Shehbaz expressed the hope that cooperation on the IMF program’s points would result in a decision from the international lender in a day or two.
According to a government representative who spoke to Dawn on Monday, “almost all the issues between the IMF staff and the Ministry of Finance were resolved hours before the finance minister’s wind-up speech on Saturday.”
Additionally, the official stated that it was now up to the IMF mission to schedule the exact dates for the lender’s executive board approval and money disbursement.
He admitted that it was not due until June 30, when the $6.5 billion Extended Fund Facility that was agreed upon in 2019 is scheduled to expire.
