Dubai: The Pakistan rupee has dropped to below 55 to the dirham after negotiations between the government and the IMF failed to reach a conclusion on releasing an additional $3 billion to bolster the economy.
Trading in the currency markets on Thursday (May 26) started with the PKR at 55.02-55.05 levels. The currency had declined by over 13 per cent since March, and the pressure will likely build up further. “Thankfully, today’s drop to date has not been steeper as many feared, especially with no results to show on the new IMF funds,” said an FX analyst.
“In fact, it seemed that the currency was actually firming up, even slightly, when it slipped to under 55. That didn’t last, though.” (The IMF talks with the Pakistan officials were taking place in Doha.)
According to analysts, there could have been a steeper drop, but Saudi Arabia's decision to rollover the payment of funds kept with State Bank of Pakistan has provided a short-term support. Early on Thursday, the exchange rate was pegged at around 54.60 levels.
Expecting a remittance peak
Coming days could see heavy activity on the remittance side, as UAE based expat Pakistanis make full use of the softening currency. Over the last few days, there has been a steady rise in remittances, with each drop against the dirham capturing the interest of remitters.
Holding up the $3b
Pakistan, which has just gone through a change of government, had much riding on the IMF talks. The $3 billion, if it had been released, would have provided some short-term bolster for the economy. The talks, however, floundered over the government continuing to subsidise fuel sales in the country.
“Not just removing subsidies, the IMF wants the Pakistan government to raise fuel prices by 25 rupees or so,” said an analyst. “That makes for one tough decision.”