The International Monetary Fund (IMF) loan program’s reactivation has been delayed, and the tremendous looming danger of default on repayment of foreign debt has caused the Pakistani rupee to drop to a new all-time low against the US dollar on Tuesday in the interbank market at Rs288.
Today, the exchange rate fell 1% (or Rs2.86) to Rs288.43Â about the US dollar. The rupee’s previous day’s closing price was Rs285.04 to the US dollar. On February 3, 2023, the rupee reached a record low, closing at Rs285.09 to the US dollar.
Financial importers have reportedly restarted their panic purchases of US dollars even though the interbank market’s supply of foreign currency has remained low.
Months after increasing taxes and energy costs and allowing the currency’s value to decline to comply with IMF requirements, Pakistan’s loan programme has yet to materialise. The country needs to catch up on deadlines to continue its bailout.
The cash-strapped country obtained a USD 6 billion IMF bailout in 2019. To help the nation recover from disastrous floods, it was supplemented with an additional USD 1 billion last year. Nevertheless, the IMF froze disbursements in November due to Pakistan’s failure to make further progress on fiscal reform.
The Washington-based lender has requested Pakistan obtain guarantees for new financing from Saudi Arabia and the United Arab Emirates before it revives the bailout after months of fruitless negotiations. Pakistan still needs to perform a few tasks before it can receive a USD 6.5 billion bailout, according to the resident representative of the IMF for Pakistan.
Investors are also concerned about the nation’s declining foreign exchange reserves, which have been declining recently. Only USD 4.24 billion of the central bank’s foreign exchange reserves are currently at a critical level.
