Stock - Pakistani Rupee
The Pakistan government is trying to hammer out a deal that will see the IMF release more of the much needed funds, which would be another $3 billion. Image Credit: Bloomberg

Dubai: The Pakistan rupee remains stuck at 54.35-54.40 levels to the dirham (or near 200 to the dollar) as talks continue between the Pakistan Government and the IMF over release of additional funds to inject into the economy.

The currency has been under unremitting pressure in recent weeks, with a new government taking over and trying to find ways to resolve the economic and monetary crisis. “What the government needs immediately is clear – the release of another $3 billion from IMF as part of the Special Drawing Rights,” said an analyst. “But what the IMF seems bent upon is getting Pakistan to agree to a withdrawal of subsidies, especially on fuel.”

That has not happened so far, and this is where the current talks on the release of funds – being held in Doha – will try and find a solution.

Steady on remittance

The steady decline in exchange rate is ensuring ‘steady remittance volumes from the UAE to Pakistan in recent days and with a sharp rise by month-end/early June,” said a treasury official with a local currency house. “Yesterday (May 19), there was a slightly higher remittance level because of the PKR breaching the 200 mark to the dollar.”

While the Pakistan currency managed to hold its own even as other emerging market (EM) peers dropped in the days after the launch of the Russia-Ukraine conflict on February 24, recent weeks have been quite volatile. On May 1, the PKR dropped below 50 to the dirham compared with 48.40 on January 1, 2022 and 49.65 on April 1. Early today (May 20), the inter-bank rate is 54.38 to the dirham while the exchange rate 54.25 – which is a new peak. (On May 19, the exchange rate was around 54.05.)

“Any improvement from here depends wholly on the release of funds by IMF,” said the analyst. “But will the government have to scale down the fuel subsidies to make it happen?”