The Pakistani rupee continued its recovery for the third successive working day as it may settle around the level suggested by the International Monetary Fund (IMF) at 150 to the US dollar.
With a fresh recovery of Rs1.17 (close to 1%) on Monday, the currency has recovered a total of Rs2.21 (or 1.45%) in the past three days to Rs149.74 to the greenback in the inter-bank market, the State Bank of Pakistan (SBP) reported.
“We had set a target of taking the rupee apparently to 150 (to the greenback) under the IMF’s conditions for a loan of $6 billion,” PM’s Economic Advisory Council member Dr Ashfaque Hasan Khan told The Express Tribune.
The rupee had plunged 7.5% to an all-time low at 151.95 last week. “Now, it is settling around 150. This is my guess,” he said.
It seems the rupee will continue to move around the targeted level, going forward.
He, however, asked whether the rupee’s depreciation had improved economic fundamentals? “Where had the central bank theory gone according to which market forces were determining the rupee-dollar parity keeping in view the demand and supply condition of dollars in the economy. Has the supply of dollars increased because of which the rupee is recovering the lost ground,” he questioned.
“Economic fundamentals have remained unchanged in the past one week but the rupee has lost value,” he said.
Taurus Securities’ analyst Mustafa Mustansir said, “The recovery of the rupee came after Saudi Arabia activated (from July 2019) a credit line of $3.2 billion for the supply of petroleum oil to Pakistan on deferred payment.”.
Pakistan remains a net oil importing country and oil remains its largest import commodity. Oil import constitutes around one-fourth of the total import bill because Pakistan meets nearly 70-80% of its energy needs through imports.
In addition to the Riyadh credit line, Arif Habib Limited Head of Research Samiullah Tariq recalled that the adviser to PM on finance had announced last week that the Islamic Development Bank (IDB) would also revive a credit line of $1.2 billion for oil imports from July.
Apart from this, the World Bank and the Asian Development Bank (ADB) would also lend $2-3 billion if Pakistan implemented the IMF loan conditions to fix the faltering economy, he said.
Past trends suggest the supply of dollars and other foreign currencies increase in the market in the last 10 days of Ramazan and this is the case at present.