Pakistan’s rupee plunges as IMF says mission to visit next week | Business and Economy News
Pakistan is seeking $1.1 billion from the fund, part of its $6 billion bailout package, to avoid a default.
The Pakistani rupee fell to a historic low against the US dollar after a currency border was lifted as the cash-strapped country tries to unlock vital aid from the IMF.
The Washington-based lender has yet to approve a crucial $1.1 billion tranche that was originally due last November as part of a $6 billion bailout provided in 2019.
Talks with the IMF to resume bailouts have stalled in recent months as the institution demands more progress on fiscal consolidation and economic reforms.
On Wednesday, the rupiah closed at 230 against the US dollar. It fell even further, trading at 255 per $1 within hours of the market opening on Thursday. A few hours later, the Central Bank of Pakistan confirmed that the currency had fallen 9.6 percent against the US dollar after the lifting of price restrictions imposed by the government but opposed by the IMF.
Financial expert Malik Bostan told the Associated Press that the value of the rupee fell mainly due to a delay in restarting IMF bailout talks amid depletion of foreign exchange reserves, but expected it to stabilize as talks resume.
On Thursday, the IMF Resident Representative said that an IMF representative would visit Pakistan later this month to discuss the suspended ninth review of the country’s current financing program.
“At the request of the authorities, a personal mission of the Foundation is scheduled to visit Islamabad from January 31 to February 9 to continue negotiations,” Esther Perez Ruiz was quoted by Reuters news agency.
A successful visit is critical for Pakistan, which is facing an increasingly acute balance of payments crisis and is desperate to secure external financing as its foreign exchange reserves cover less than three weeks of imports.
Multilateral and bilateral commitments to fund Pakistan’s recovery efforts from last year’s devastating floods also come with the country getting the green light from the IMF.
Prime Minister Shahbaz Sharif said this week that his government is ready to stick to the fund’s “tough terms” to revive the $6 billion aid package, which was boosted by another billion in 2020.
Since taking office last year, Sharif has struggled to get the economy back on track, blaming former Prime Minister Imran Khan and his government for the economic woes. Khan was removed from office in April 2022 in a parliamentary vote of confidence and has been campaigning for early elections ever since.
Thousands of shipping containers of raw materials for industry, food and medical equipment are held up at the port of Karachi as banks refuse to guarantee importers’ dollar transactions.
Pakistan was also hit by a nationwide power outage earlier this week linked to a cost-cutting measure estimated to cost the textile industry alone $70 million.