Pakistan rupee rises to 219 vs dollar after $1.1b IMF fund release deal

Dubai: The Pakistan rupee has felt the immediate lift from the IMF confirming a $1.1 billion release, with the currency at 219.50 against the dollar and up from 222 overnight. FX analysts expect a further firming up to 215/216 levels, though the devastating floods and the enormous cost of relief and reconstruction works – estimated at $10 billion - could slow down a bigger rally.

“After the volatility the PKR has been through since March, we can expect some stability after the IMF announcement,” said a senior treasury analyst. “In short order, you had UAE, Saudi Arabia and Qatar also announcing direct investments or extending credit lines to Pakistan and now there is the IMF.”

August has been a relatively less volatile period for the PKR, but even then it was quoting at 222 yesterday, which was when the meeting with the IMF was happening and the final terms and conditions agreed upon. Earlier in the month, it had firmed up to 212.

“That’s still mild given how sharply the PKR had fallen in July, and with an all-time lowest point of 240,” said the analyst. “For the near future, the big unknown is the reconstruction efforts needed for the flood-affected areas. The Government and its various entities will need to devote attention full-time on the relief and re-development. Can they spare the time and effort to focus on the economic aspect?”

The authorities in the run up to the final deal with IMF had rolled back subsidies and raising fuel and power tariffs.