KARACHI: During intraday trade in the interbank market, the local currency fell by more than Rs18.89 versus the US dollar ahead of the monetary policy review and delay in the International Monetary Fund (IMF) arrangement.
At roughly 11:36 am, the dollar was trading for Rs285 versus the local currency. A day earlier, it had been closed at Rs 266.11.
In the meantime, the open market price of the dollar is Rs 292.
The lender’s requirement to peg the currency rate with that of the grey market, also known as the Peshwar market, has caused confusion, according to ECAP general secretary Zafar Parahca, who also noted that the market’s primary issue is the delay in the agreement with the IMF.
According to Paracha, the present rate is excessive and shouldn’t have increased by such a large amount.
He continued by saying that a day ago, the dollar was trading for Rs290 in the black market.
Adnan Asghar, a currency market expert, claimed that delays in a settlement between Pakistan and the IMF were to blame for the currency’s decline. He stated the country was “nearing a default situation” with this delay.
Uncertain political circumstances continued to be a contributing element, he said.
The IMF and Pakistani authorities have been in discussions over policy framework issues since early February. A staff-level agreement would pave the way for more finance from other bilateral and multilateral lenders, they hope.
After the accord is concluded, the lender will release a tranche of more than $1 billion from the $6.5 billion bailout deal agreed to January 2019.
To earn money to overcome the budget deficit, Pakistan has already implemented a number of measures, including converting to a market-based exchange rate, increasing fuel and power costs, abolishing subsidies, and raising taxation.
According to officials, the lender and Islamabad are still in negotiations regarding debt in the power industry and a prospective increase in the policy rate, which is now at 17%.
The tight measures could cause the inflation, which was 31.55% in February, to increase and the economy to further contract.
The economy of the South Asian nation has been in disarray, and it urgently needs outside funding. Its foreign exchange reserves have fallen to only $3 billion, which is hardly enough to cover three weeks’ worth of imports.