Ajit Karn
Pakistan IMF Bailout
Pakistan Bailout, Pakistan’s moves to loosen its grip on the currency and raise fuel prices show that the country is finally making the unpopular decisions it needs to make to get the $6.5 billion bailout program from the International Monetary Fund.
According to the foreign exchange desk at AKD Securities Ltd., the rupee fell to as low as 270 per dollar on Monday. This happened because the government let the market have more control over the currency, which was one of the IMF’s requirements for the loan. Over the weekend, the government also raised gas prices to a record high. This was done before an IMF team arrived on Tuesday for a loan review, which had been delayed for months because of the next loan tranche.
Pakistan is getting deeper into a crisis because there aren’t enough dollars and inflation is going up. This makes it even more important for Prime Minister Shehbaz Sharif to get money from the IMF. The country needs money badly because its savings have dropped to $3.7 billion, which is less than one month’s worth of imports, this is really important for the Pakistan Bailout plan.
“These decisions show that Pakistan is serious about the IMF programme, even though it’s an election year,” said Suleman Rafiq Maniya, head of advisory at Vector Securities Pvt. Ltd. “All of it depends on how the IMF team acts when they come to visit. These steps hurt a lot and cost a lot in terms of politics.”
Crisis-Hit Pakistan Takes Hard Steps To Secure Bailout From IMF https://t.co/xrRUXSANlV pic.twitter.com/09F9Vsddx0
— NDTV News feed (@ndtvfeed) January 30, 2023
Sharif has said that his coalition government is determined to finish the Pakistan bailout plan, even if it means paying a political price just months before national elections. This is because the government has been slow to implement key decisions. The country’s economic leaders, led by Finance Minister Ishaq Dar, will have a hard job ahead of them. They will have to convince the IMF that the country is ready to take other tough steps, like raising taxes and gas prices.
Frontier markets that want to borrow money from the IMF are under more pressure to let go of their currencies, which will help their current-account balances. This month, Egypt’s currency lost value for the third time in less than a year. Ankur Shukla, an analyst in Mumbai, said in a note on Monday that calculations by Bloomberg Economics show that the rupee should be stable at 266 rupees per dollar.
Also read:- Indian rupee falls against UAE dirham
This month, the Pakistani rupee fell because money exchange companies decided to stop putting a cap on the dollar-rupee rate on the open market. Onshore money exchanges have run out of dollars because locals have turned to the black market, where the dollar is being sold for about 10% more than what it is worth.
