Delay in IMF's bailout programme may devalue Pakistani rupee: report

Amidst financial certainty and delays in the International Monetary Fund’s (IMF) bailout programme, the Pakistani currency is expected to lose its value against the dollar, according to a report.

Tresmark, a private company providing trading and treasury solutions, issued a report reflecting the significant challenges the government can face if it fails to unlock the bailout programme.

“The outlook is stable for the rupee, but it may go beyond the stable position of Rs279 due to the uncertainty around the IMF programme,” stated the report.

According to the report, the decision to keep the rupee stable is still present, which assisted in the rupee range-bound last week despite the high demand.

“Liquidity in the interbank was slightly more squeezed than last week and resulted in swap premium in the shorter range (1 week) trending around 14 percent versus in the medium tenor (3 months) trending around 8.0 percent,” it said.

“Fears of dollarisation if interest rates go down too quickly will resurface. Already there is an outflow of more than $78 million of hot money, primarily from T-bills, during the first 15 days of August,” it added.

However, the State Bank of Pakistan (SBP) is set to announce a new interest rate on September 12, and traders are expecting a decline in the policy rate from 100 to 200 basis points.

The current policy rate is 19.5 after SBP cut 250 bps in the last announcement.

In August, the country witnessed a decline in inflation, which plunged to a single digit of 9.6 percent.

On the other hand, the report stated: “Traders are apprehensive of a plan to change currency notes where extensive bundles of notes under the bed will be exchanged for assets in the form of gold and dollars — both of which are trending higher in parallel markets. The dollar in the grey market is trading at 285.”