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Rupee registers handsome losses in pre-monetary policy session

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  • In interbank market, rupee fell 2.01 or 0.93%.
  • The local unit closes at 216.66 against dollar.
  • Rupee fell 0.31% against greenback last week.

KARACHI: The Pakistan rupee lost ground against the US dollar Monday ahead of the monetary policy announcement — scheduled for today — and the speculations surrounding the International Monetary Fund (IMF).

In the interbank market, the rupee fell 2.01 or 0.93% against the dollar to close at 216.66, down from Friday’s close of 214.65, according to data from the State Bank of Pakistan (SBP).

The greenback traded at 213-214 during the outgoing week. It closed at 213.98 per dollar on Monday and finished at 214.65 on Friday. The rupee fell 0.31% against the greenback last week.

Economist and former adviser to the federal ministry of finance Dr Khaqan Hassan Najeeb said the local unit slipped by Rs2 against the dollar due to political developments and the strengthening of the dollar internationally.

“But we also know the economic situation remains challenging. SBP reserves are weak at $7.8 billion — hardly enough for over a month of imports,” he said.

Non-oil imports are curbed by SBP by rationing the opening of letter of credit (LC), the economist said, adding that oil is already in excess, so oil imports are low.

“Point being, we are operating in a restricted environment, and there would be import needs piling up.”

Getting flows including IMF money, multilateral and bilateral monies, and new foreign direct investment (FDI) is essential to normalise the balance of payments.

“Of-course exports drop and remittance slowdown in July must be looked at carefully.”

Talking to The News, a trader said that apart from forex inflows and outflows, the monetary policy decision will be instrumental to gauge the rupee’s future direction.

Another factor that weakened the rupee was a shortage of greenback in the open market, which moved up the rate of the interbank price of the dollar as well.

The government lifted a ban on the import of non-essential and luxury goods to meet a condition of the IMF ahead of the board’s meeting later this month to revive the loan programme.

However, it announced the imposition of heavy duties on completely built units cars, mobile phones, and electronic appliances to discourage imports.

The market will also evaluate the impact of opening up luxury imports on the rupee, according to traders.

The foreign currency reserves have started to recover. The foreign reserves held by the central bank slightly increased by $67 million or 0.9% to $7.9 billion as of August 12.

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“Ready to work with Pakistan’s new government,” the IMF said.

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In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

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In a new IMF agreement, Pakistan would “raise” the FBR tax-to-GDP ratio to 15%.

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The state bank reserves will be maintained at a level equivalent to three months’ worth of import bills, according to sources in the Finance Ministry.

According to sources, the ministry has also set a goal to maintain the primary balance surplus and reduce the current account deficit.

The ministry insisted that once the existing agreement expires, a new one would be negotiated with the IMF, and that the IMF will also be guaranteed that the requirements will be implemented prior to the agreement being finalised.

The founder of Pakistan Tehreek-e-Insaf (PTI) demanded that an audit of the election results be conducted before the International Monetary Fund (IMF) approved any additional loans for Islamabad. However, the IMF showed earlier today that it was eager to cooperate with the new administration in Pakistan by disregarding the demand.

According to Bloomberg News yesterday, Pakistan is to apply for a fresh $6 billion loan from the International Monetary Fund to assist the next government in paying off billions of dollars in debt that comes due this year.

According to the article, the nation would attempt to negotiate an Extended Fund Facility with the IMF, and it was anticipated that discussions with the international lender would begin in March or April.

Thanks to a short-term IMF bailout, Pakistan avoided defaulting last summer. However, the plan expires next month, and the next administration will need to negotiate a long-term deal to keep the $350 billion economy steady.

The IMF forced the South Asian country to enact a number of reforms prior to the rescue, including raising its benchmark interest rate, changing its budget, and raising the cost of natural gas and electricity.

According to a fund spokeswoman, the IMF staff is still in communication with authorities on the necessary longer-term reform initiatives. The fund is also prepared to assist the post-election government in addressing Pakistan’s ongoing issues by means of a new arrangement, should that request be made.

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39% increase in IT exports in January: Dr. Umar Saif

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According to Dr. Umar Saif, the acting minister for information technology and telecommunication, IT exports increased by 39.4% to $265 million in January of this year from $190 million in the same month the previous fiscal year.

The IT sector in Pakistan is expanding and breaking records. The minister wrote on X that “IT exports in January are up by 39.4% to $265 million, compared to $190 million in the same month in 2023.”

The minister also revealed that IT exports to the United States over the first seven months of the current fiscal year (July–January) were $1.7 billion, up 13 percent from $1.5 billion in the same time previous year.

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