Stock - Pakistan economy - Pakistani rupee
Will the IMF release of funds decisively halt the recent slide in the PKR? Image Credit: Bloomberg

Dubai: The Pakistan rupee could be in for an immediate lift with the government confirming a key milestone has been reached in getting much needed funds released by the IMF. The PKR had been going through some heavy volatility since March, slipping to successive lows during this period.

Pakistan has received ‘combined economic and financial targets’ for the seventh and eighth reviews of its IMF bailout programme, Reuters reported Pakistan’s Finance Minister as saying. On Twitter, the FM, Miftah Ismail, said the government had received the lender's Memorandum of Economic and Financial Policies (MEFP) for both reviews, following meetings last week between the two sides.

“This will lead to the release of a near $1 billion initially from the IMF and then another $2 billion,” said an analyst. “More important, Pakistan can look forward to favourable credit flows from some of its key allies, much like what China did just recently.

“Before the IMF fund release, there will need to be a couple of amendments that have to passed in the National Assembly. That would be imminent. So, most likely, the funds will release before Eid.”

Heavy on turbulence

On June 21/22, the PKR was listing at 212.25/212.27 to the dollar. Currently, it’s at 206/$ levels – “What we expect to see from the IMF deal is a reduction in the extreme volatility and for the exchange rate to stabilise,” said a treasury official with a leading remittance house.

Early Tuesday (June 28), the exchange rate in the UAE is hovering at 56.25 to the dirham.

The PKR is 'expected to trade around 200 by the end of this quarter after getting the IMF $6 billion loan,' according to analyst expectations.

Syed Asif Zaman

In fact, the strengthening towards 207/$ started after the government signed a $2.3 billion loan facility with a Chinese banking consortium of banks, giving a boost to the country's falling FX reserves'. Still, the PKR has plunged over 16 per cent so far this year as Southeast Asian economies grapple with high import bills and widening current account deficit coupled with Moody’s lower credit ratings.

- Syed Asif Zaman, CEO of Ahmad Alagbari, a Dubai-based chartered accountancy firm