Rupee recovers from record low as Pakistan, IMF begin talks

KARACHI: The rupee rose from a record low on Tuesday as Pakistan, which is in an economic crisis, started talks with the IMF to release funds from a bailout package that has been halted since November.

The local currency increased 0.65 percent or 1.74 rupees to stand at 267.89 per dollar in the interbank market, according to the central bank data.

Finance Minister Ishaq Dar met with the IMF review mission, which was headed by Nathan Porter, the IMF mission chief, to brief him on the fiscal and economic reforms and measures being taken by the government to complete the 9th review under the Extended Fund Facility.

Resuming discussions on the bailout was subject to a number of IMF criteria, including a market-based exchange rate for the country’s currency and a reduction in fuel subsidies.

Pakistan removed an artificial ceiling on the rupee last week, which caused it to depreciate against the dollar by 17 percent till Monday. Additionally, it increased petrol prices by 35 rupees citing a rise in global energy prices as the reason for the increase.

To combat record-high inflation, the central bank increased interest rates this month by 100 basis points to 17 percent.

Analysts believed that the IMF meeting might have boosted investor confidence in the currency. The export earnings and remittances appear to be picking up.

“Progress on IMF has certainly helped, while there are increasing expectations around better remittance and export flows,” said Fahad Rauf, the head of research at Ismail Iqbal Securities.

The rupee continued to decline in the open market, in contrast to the interbank market. It decreased by 1.50 rupees, or 0.54 percent, to stand at 276.50 per dollar.

“There has been a dollar shortage in the open market. We did not have enough greenbacks on hand to satisfy client demand,” said Zafar Paracha, the general secretary of the Exchange Companies Association of Pakistan.

“As the supply began, we anticipate that the rupee would experience a correction in the kerb market in the coming days,” Paracha added. He said the current IMF meeting should produce productive results.

The crisis-hit country is dealing with a serious balance of payments crisis and has just about three weeks’ worth of import coverage in foreign exchange reserves. Pakistan is scrambling to secure foreign financing to avoid default.