Rupee appreciates on IMF’s loan optimism

KARACHI: The rupee posted further gains on Friday after the International Monetary Fund confirmed that its board will meet this month to review the $7 billion loan programme for Pakistan.

In the interbank market, the rupee gained 28 paisas to close at 278.16 against the dollar. On Thursday, the local unit ended at 278.44.

The rupee also traded stronger in the open market. It settled at 280.75 per dollar, compared with 278.85 in the previous session.

Analysts stated that the rupee strengthened due to increased clarity on key economic issues, which boosted investor confidence.

The State Bank of Pakistan (SBP) has reduced interest rates by 200 basis points to 17.5 per cent.

The government has arranged over $2 billion in external financing to address the funding shortfall required to meet the IMF conditions, Jameel Ahmad, the governor of the State Bank of Pakistan, said this during an analyst briefing after announcing the monetary policy on Thursday.

The SBP provided optimistic guidance on inflation outlook and the management of the external financing gap, said Chase Securities in a note.

“This positive sentiment was further reinforced by the IMF’s announcement that Pakistan’s programme approval will be considered by the executive board on September 25, 2024,” it said.

With inflation on a steady downward trajectory, there is potential for further interest rate cuts in the upcoming monetary policy meeting.

“The recent decline in global oil prices has also contributed to lower local fuel costs, with petrol prices expected to drop by Rs12 in the upcoming fortnightly review, which will help keep inflationary pressures in check.”

While the medium-term IMF programme offers much-needed clarity for financial markets, meeting the quarter-on-quarter reform targets and IMF benchmarks will remain a challenge, such as missed revenue targets might lead to a mini-budget, according to the report.

However, the programme signals improved economic and external account stability, which is crucial for investor confidence, it noted.