Rupee seen stable as IMF tranche counteracts bond repayment impact

KARACHI: The rupee is expected to hold its ground in the forthcoming week, currency traders anticipate, despite the country's scheduled repayment of $1 billion in international bonds.

The stability is largely attributed to the anticipated inflow from the International Monetary Fund’s (IMF) final tranche under the bailout program, which is due within the month and is poised to balance the outflow from the eurobond payments.

“Market sentiment is leaning towards a stable rupee in the immediate future,” said a currency dealer. “The upcoming IMF tranche is seen as a significant buffer that should mitigate the impact of the bond repayment.”

This week, the rupee saw two trading sessions. On Monday, the local unit closed at 277.95 against the dollar, and on Tuesday, it closed at 277.94. Markets were closed from Wednesday to Friday for public holidays on account of Eid-ul-Fitr.

The dollar bond repayments made by Pakistan’s central bank on Friday are anticipated to strain the foreign exchange reserves.

The pressure on the reserves will be lessened, meanwhile, by the expected final installment from the International Monetary Fund by the end of this

month.

Traders predict that since the payments were planned and due to optimism about the new IMF loan programme, the rupee is not likely to see a large fluctuation.

“Because of the weak dollar demand from importers and the improved dollar liquidity brought about by higher remittances, dollar sales by exporters, and positive sentiments, we anticipate that the rupee will be stable over the next week,” said a forex dealer.

The IMF Chief Kristalina Georgieva has confirmed that Pakistan is seeking a potential fresh bailout package following the completion of the SBA that expired on Friday.

Pakistan and the IMF last month reached a staff-level agreement on the second and last review of the SBA, which, if cleared by the global lender’s board, will release about $1.1 billion to the South Asian nation this month. The IMF board is expected to review the matter in late April.

Since the $1.1 billion is anticipated to be received in April, the State Bank of Pakistan's foreign exchange reserves will not be significantly affected.

The sentiments are positive among investors because of optimism following an increase in remittances and a financial package from Saudi Arabia for Pakistan.

Pakistan and Saudi Arabia have jointly agreed to expedite the implementation of the first phase of a $5 billion package.

According to reports, the package includes an increase in Saudi deposits in the central bank and investments in oil refineries and the Reko Diq project. The onus now lies with the government on how swiftly these investment projects can be executed.

The month of Ramadan and Eid holidays led to a significant surge in remittances for March, reaching the $3 billion mark.

This robust figure has the potential to result in a current account surplus for the month.