The US dollar welcomes
ISLAMABAD: On Tuesday, the first working day after the appointment of the caretaker prime minister, the US dollar further gained value. In the inter-bank market, the dollar-rupee exchange rate surged to 290 rupees with a gain of Rs 2.
Meanwhile, in the open market trading, the greenback hit the 300 rupees mark once again. It appears that in the coming few days, the dollar will set a new record in the inter-bank and open market trading in Pakistan.
There are two apparent which are driving up the value of the US dollar in Pakistan. First, it is the IMF’s condition to ensure a free float of the exchange rate. Secondly, the weak economic management under the caretaker setup will certainly trigger the value of the dollar.
It will create more trouble for the people and the business circles in the country. Because it will further inflate the cost of living and the cost of doing business.
On Tuesday (August 15), the caretaker PM Anwarul Haq Kakar called a maiden meeting with the economic team. It shows Kakar’s priority in understanding the economic problems, the country has been experiencing for months.
Nevertheless, how much authority or independence the caretaker government will have in tackling economic challenges such as inflation, the rising cost of utilities, and the depreciation of the rupee?
It is clear that after a deal with the IMF, the government will not be able to give any relief to the consumers.
IMF package further derails Pakistani rupee
Meanwhile, Pakistan’s bailout package deal with the International Monetary Fund proved more fatal for the local currency in comparison with Sri Lankan currency.
On Tuesday, the Pakistani Rupee (PKR) fell to 298 rupees in the open market trading. In inter-bank trading, the dollar-rupee exchange rate widened to 290 rupees.
In sharp contrast to this, the Sri Lankan rupee posted a significant gain after the IMF’s loan approval for the country. When Sri Lanka declared default, its currency depreciated to 364 rupees to a dollar. However, when the IMF approved a bailout package for Sri Lanka in March this year, Sri Lankan currency started regaining value.
Consequently, by Tuesday (August 10), the Sri Lankan rupee has improved to 323 rupees to a dollar.
Notably, the IMF has given 48 months arrangement to Sri Lanka involving $3 billion. However, in the case of Pakistan, the IMF approved only a 9-month stand-by arrangement worth $3.2 billion.
For Pakistan, the IMF has demanded a market-based exchange rate _ opening the way for further devaluation of the rupee amid multiple factors.
Surprisingly, the value of the Sri Lankan rupee has improved significantly after the country got the IMF loan. However, the IMF package did not support the Pakistani currency because of its harsh and bizarre conditions.
For Pakistan, the IMF approved a loan in July 2023 for nine months, and in March 2024, the program will expire. Thus once again Pakistan will be looking for another IMF loan program to avoid default and to fulfill foreign exchange requirements.
So far, Pakistan has obtained 24 bailout programs from the IMF and the country will need the next one around 2024 amid political uncertainty. If the general elections are not held on time, it will deepen political uncertainty that will, indeed, trigger economic uncertainty.
