KARACHI: According to market sources, the International Monetary Fund’s (IMF) most recent proposal to further liberalize imports could upset the rupee-dollar exchange rate.
An informed senior financier informed Dawn on Thursday that “the IMF expects to see an up to 45 per cent rise in the importation in the latter part of the fiscal year at hand, which would certainly put stress on the foreign exchange rate.”
According to him, the $3 billion Stand-By Arrangement’s final $1.2 billion tranche will be released in March subject to new requirements that the IMF has drafted.
The banker stated, “I think Pakistan will get the remaining $1.2 billion, but it will have to release the imports, which will definitely put a strain on the exchange rate.”
Fund releases the final $1.2 billion tranche subject to new requirements.
During the initial half of the present fiscal year, imports decreased by 16 percent. It would be extremely difficult for the incoming government to turn to the IMF for another rescue package totaling more than $6 billion if the nation does not permit imports as instructed by the fund.
The banks have not shown the importers any mercy thus far for issuing the letters of credit, and some bankers have stated that such a level of import liberalization is not feasible.
With its foreign exchange reserves, the State Bank of Pakistan (SBP) can only fund imports for six weeks. In addition, the government still lacks $6 billion in debt service payments for the present fiscal year.
Increased SBP reserves
In the meantime, the SBP reported on Thursday that during the week ending on February 9, its foreign exchange reserves rose by a pitiful $13 million to $8.056 billion.
Despite an IMF infusion of $700 million, the SBP reserves decreased by $173 million the week before.
Pakistan’s indecisive political and economic landscape has prevented it from obtaining dollars from overseas markets. The economy was unable to increase its growth rate.
In contrast to a decline in FY23, the IMF has projected a 2 percent GDP increase in FY24. Analysts and specialists, however, assert that the growth is substantially less than what the nation needs. This will further reduce revenue and raise unemployment. Currently, 29 percent inflation is the primary cause of the revenue growth.
The market source claimed that the bank has been lending from the interbank market to bolster its foreign exchange holdings, but the SBP did not provide an explanation for the increase in reserves.
On Thursday, the interbank market saw the dollar finish at Rs279.38, up just six paise from the previous day.
According to SBP figures, the county’s overall reserves at the close of the preceding week were $13.149 billion, which included $5.092 billion from commercial banks.
SOURCE: DAWN NEWS
