ISLAMABAD: Pakistan’s economy faces significant challenges as its currency as rupee reached a record low against US dollar on Tuesday.
The country is currently struggling to secure critical International Monetary Fund (IMF) funding, while declining foreign exchange reserves have become another major source of concern for investors.
In the interbank market, the Pakistani rupee closed at 287.29 against the US dollar, representing a 0.78% decrease from the previous day’s close of 285.04. Financial analysts suggest that importers have resumed panic buying of US dollars, while the supply of foreign currency remains low.
Despite raising taxes and energy prices and allowing the currency to depreciate to meet IMF conditions, Pakistan’s loan programme is yet to materialize, and the nation has missed several deadlines to resume its bailout.
Following months of unsuccessful negotiations, the IMF has now asked Pakistan to seek commitments for new loans from Saudi Arabia and the United Arab Emirates before reviving the bailout.
The IMF’s resident representative for Pakistan has asked Pakistan to take more hard steps to get the $6.5 billion bailout package. In contrast, last month, the lender approved a $3 billion loan program for Sri Lanka to ease its economic crisis. The current uncertainty surrounding the IMF and friendly countries’ inflow has significantly affected the Pakistani rupee, according to Mohammad Sohail, CEO of Topline Securities.
He also mentioned that some of the ruling coalition partners are expected to visit Saudi Arabia next week, which is a crucial event to watch. Finance Minister Ishaq Dar will lead a high-powered delegation to the US to attend the annual spring meeting of the Bretton Woods Institutions, including the IMF and World Bank, from April 10 to 16.
Additionally, Pakistan’s foreign exchange reserves have recently declined, further contributing to investors’ concerns. The central bank’s forex reserves now stand at a critical level of only $4.24 billion as of March 24, 2023. Overall, Pakistan’s current economic situation poses significant challenges that require urgent attention and effective solutions.
