Rupee Depreciates Below 268 Against the USD Amid IMF Talks

The Pakistani rupee (PKR) lost ground against the dollar today as negotiations with the International Monetary Fund (IMF) intensified from yesterday.

It increased to a high of 265 against the dollar before declining 0.35 percent and closing at 268.83 after losing 94 paisas. Despite the losses experienced today, the general belief is that the PKR is correcting itself as markets wait for the IMF’s judgement in the coming days.

The PKR lost moreover Rs. 35 between Wednesday and Friday, snapping a 29-day losing trend, and today’s losses come just one day later.

In the open market, the local currency began trading at 265.25 against the US dollar. By lunchtime, the dollar strengthened against the rupee, reaching a high of 265. Before the interbank close, the local currency began to reverse gains after 1 PM and sank to the 267 level versus the top foreign currency.

As markets respond to a challenging round of negotiations between Pakistan and the IMF today, the rupee reported losses versus the US dollar. Despite the rupee’s negative performance today, money changers claimed that exporters’ attitudes had much improved since the recent lows of the PKR and that they were now routinely seeking external loans. Even if the general public seems to be against market free-float, this demonstrates faith in it.

In the meantime, news that the government had finalised new taxes totaling Rs. 300 billion in consultation with the IMF contributed to today’s PKR decline.

The government is in a severe balance of payments crisis and barely has enough foreign exchange reserves to fund imports for around three weeks. Pakistan is working feverishly to obtain foreign financing to prevent default.

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