ISLAMABAD: After a gap of many months, the US dollar plunged below Rs 280 in the inter-bank trading in Pakistan on Wednesday. The US Dollar continued its depreciation trend against the Pakistani rupee.
The day commenced with the US dollar experiencing a loss of 49 paisas, causing it to decline to Rs279.75 in the interbank trade.
Experts are of the opinion that the value of the US dollar will be tested at Rs 277 level in coming days.
Last time, when the US dollar breaches Rs 277 level, new buying was seen in inter-bank and open market which boosted dollar’s value to above 280.
Meanwhile, in contrast to Tuesday, when the exchange rate remained stable at Rs280.24, the State Bank of Pakistan (SBP) reported no change in value, denoting a 0% fluctuation.
Over the past few months, following its crossing of the Rs300 threshold, the value of the dollar has steadily diminished. This decline is attributed to the government’s concerted efforts against hoarding and smuggling.
The local currency has shown signs of recovery against the dollar in both interbank and open markets, particularly after the International Monetary Fund and Pakistan reached a staff-level agreement on a $3 billion stand-by arrangement in July 2023.
Meanwhile, the International Monetary Fund’s (IMF) Executive Board successfully concluded the initial review of Pakistan’s economic reform program, supported by the Stand-By Arrangement (SBA).
As a result of the Board’s decision, an immediate disbursement of SDR 528 million (approximately $700 million) has been approved, bringing the total disbursements under the SBA to SDR 1.422 billion (around $1.9 billion).
Initially sanctioned by the Executive Board on July 12, 2023, the 9-month SBA for Pakistan amounted to SDR 2.250 billion (about $3 billion at the time of approval). The program aims to serve as a policy anchor to address domestic and external balances, providing a framework for financial support from both multilateral and bilateral partners.
The key focus areas include the implementation of the FY24 budget to facilitate fiscal adjustment, ensuring debt sustainability, protecting essential social spending, restoring a market-determined exchange rate, maintaining proper foreign exchange market functioning, implementing a tight monetary policy for disinflation, and making progress on structural reforms, particularly in the energy sector, state-owned enterprise (SOE) governance, and climate resilience.
Macro-economic conditions have shown improvement, anticipating a 2 percent growth in FY24 as the recovery gains momentum in the latter half of the year. Fiscal strength has been evident in FY24Q1, achieving a primary surplus of 0.4 percent of GDP due to robust overall revenues. Despite elevated inflation, a properly stringent policy could lead to a decline to 18.5 percent by the end of June 2024. Gross reserves increased to $8.2 billion in December 2023 from $4.5 billion in June, and the exchange rate has maintained general stability.
The current account deficit is projected to rise to approximately 1.5 percent of GDP in FY24 as the recovery solidifies. With sustained sound macroeconomic policies and structural reform implementation, the expectation is for inflation to align with the State Bank of Pakistan’s target, and growth to continue strengthening over the medium term.
I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.
