Economy and Business

Pakistan agrees to depreciate rupee after IMF talks

Pakistan has agreed to allow the rupee to depreciate after holding talks with the International Mone­tary Fund (IMF) on the country's economy.

Dec 12, 2017
Pakistan has agreed to allow the rupee to depreciate after holding talks with the International Mone­tary Fund (IMF) on the country's economy.
 
The Pakistan and IMF delegations concluded the first round of discussions on Friday and took a two-day break to prepare for the policy-level wrap-up by December 13-14, Dawn online reported.
 
A senior official said that the State Bank of Pakistan would now let the currency exchange rate to adjust to market conditions after many months, rather years, of resisting expectations. 
 
The timing of the move was planned to ensure materialisation of $2.5 billion worth of receipts from two international bonds launched last month.
 
The move allowed the currency rate to touch Rs 110 to a dollar on Friday before settling down at around Rs 107 and did not go beyond official estimates. The weekend would give a breathing space instead of over-steaming the exchange rate, the report said.
 
The sources told Dawn said that the IMF had concerns over the health of Pakistan's external sector but the government authorities had a different opinion. 
 
The IMF team will share a report of its assessment with Pakistan officials on Monday.
 
While the government team, led by Finance Secretary Shahid Mehmood, will review the assessment, the IMF mission to Pakistan, led by Harald Finger, will visit Lahore next week for talks with provincial authorities including Chief Minister Shehbaz Sharif.
 
The authorities believed the currency adjustment would help shift foreign currency holdings from commercial banks currently standing at a higher level of around $6 billion back to official reserves and help divert remittances to official channels with declining gap among the official, banking and open market rates, the daily reported.
 
For the first time in many months, the central bank is reported to have noticed exporters offloading their positions. 
 
An official said that projections for China-Pakistan Economic Corridor-related repayments were within the range already discussed by the two sides in connection with debt-sustainability analysis as $23 billion worth of projects were currently under various stages of implementation, including $17 billion in the energy sector by the private sector. 
 
About $6 billion worth of projects are in the road sector.
 
The IMF director of Middle East and Central Asian Department, Jihad Azour, will also join the final round of talks next week. A meeting of the IMF mission could also be arranged with Prime Minister Shahid Khaqan Abbasi who holds the portfolio of the Finance Minister.
 
Pakistan would continue to remain under the IMF's post-programme monitoring (PPM) until about 2023 for borrowing significantly higher than its quota. The threshold for Pakistan to move out of the PPM is estimated at 1.4 billion special drawing rights (SDRs) of the IMF that now stand around 4.3 SDRs.
 
Mahmood said the two sides held various rounds of technical discussions over the last week and covered a host of areas including the macroeconomic situation, developments in energy, financial, monetary and social sectors. 

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