Pakistani rupee witnessed a massive recovery on Wednesday, registering its biggest ever day-on-day increase against the US dollar to close at 228.8. The significant recovery in the inter-bank market comes after the International Monetary Fund’s (IMF) statement citing that Pakistan has managed to meet all pre-conditions for disbursement of the next tranche of its bailout programme.
Additionally, pressure due to import payments subsided, while Pakistan also reported a much narrower trade deficit for July, taking off some pressure on the currency that saw its worst monthly performance in over 50 years in July.
At the end of the session, the rupee closed at 228.8, an appreciation of Rs9.58 or 4.19% against the greenback, according to the State Bank of Pakistan (SBP). On Tuesday, the rupee had settled at 238.38.
In intra-day trading on Wednesday, the currency had dropped as low as 226.49.
A day ago, the IMF stated that Pakistan has met all prior conditions for the combined 7th and 8th review under the Extended Fund Facility (EFF).
Pakistan has met last prior action, says IMF after govt increases petroleum levy
“With the increase in petroleum development levy (PDL), Pakistan has completed the last prior action for the combined seventh and eighth review,” said the IMF, adding that the board meeting is tentatively planned for late August once adequate financing assurances are confirmed.
After the Board’s approval, Pakistan will receive around $1.177 billion.
Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha said the development comes as the “central bank took measures to curb speculation”.
“The government and the central bank have taken initiatives to curb smuggling, which is bearing fruit,” Paracha said.
He said that oil and edible oil imports have also declined, which takes pressure off the currency.
Paracha said the market could see further improvement after the IMF’s disbursement.
In the open market, the PKR gained 11.50 rupees for both buying and selling against USD, closing at 227 and 229, respectively.
Against Euro, the PKR gained 18 rupees for buying and 17.80 rupees for selling, closing at 226 and 228 respectively.
Against UAE Dirham, the PKR gained 3.50 rupees for both buying and selling, closing at 61.50 and 62, respectively.
Against Saudi Riyal, the PKR gained 3 rupees for both buying and selling, closing at 60 and 60.50, respectively.
Meanwhile, the State Bank of Pakistan (SBP) has launched crackdown against exchange companies in order to end volatility in rupee value against the US dollar.
In a statement issued on Wednesday, the central bank said in view of recent volatility in the exchange rate and the difference between the interbank rate and the rate offered by Exchange Companies (ECs) and banks to their customers, it had increased the monitoring of the foreign exchange operations of ECs and banks.
In this respect, SBP started inspections of a number of exchange companies and banks since Monday (August 1, 2022).
On Tuesday (August 2, 2022) SBP suspended the operations of four branches of two ECs (Galaxy Exchange Co and Al-Hameed International Money Exchange Co) for violation of SBP regulations.
SBP has also imposed monetary penalties on some ECs in the recent past. Besides, due to violations of SBP instructions, arrangements of 13 franchises have been terminated by six different ECs in the recent past.
SBP has also started conducting mystery shopping exercise throughout Pakistan to investigate the apprehensions that some ECs are not selling foreign currency to their customers.
A meeting of the Exchange Companies Association of Pakistan has also been called on August 4, 2022.
If needed, SBP would augment its enforcement actions on the ECs and the banks in light of findings of the on-going inspections and mystery shopping.