Pakistan rupee hits all-time low days after IMF bailout deal

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Wed, 2019-05-15 18:21

KARACHI: The Pakistani currency on Wednesday hit an all-time low
of 146.25 rupees against the US dollar amid looming fears of
further devaluation, just days after Pakistan signed a bailout deal
with the International Monetary Fund.
The $6 billion bailout package comes with strict reform conditions,
including measures to maintain a free-floating exchange rate.
After reaching the record low, the rupee closed at 144 against the
dollar at the end of the trading day.
Malik Bostan, president of the Forex Association of Pakistan, said
he met with Prime Minister Imran Khan on Wednesday, who assured him
that the IMF had not demanded further devaluation of the rupee.
“The IMF has only demanded an exchange rate based on demand and
supply,” Bostan told Arab News. 
“After the meeting with PM, dollar rates have started cooling
down and will further stabilize. We have requested the government
to impose a ban on rumors regarding the rupee that are hurting
market sentiments. Predictions about the dollar (in) the media
should be stopped.”
Bostan said that Khan had consented to setting up a committee
comprising officials from the State Bank of Pakistan, exchange
companies and the Finance Ministry to resolve the issues faced by
exchange companies.
“We have informed him we can increase inflow of greenback from
$5-6 billion to $7-8 billion provided agreements are facilitated
with around 500 international companies operating in Pakistan,”
Bostan said, adding that the PM had agreed to devise a mechanism to
discourage the outflow of dollars from Pakistan by encouraging
investment in the country.
The International Monetary Fund and Pakistan reached a “staff
level agreement” on Sunday for a $6 billion bailout package
following months of negotiations on a deal that aims to bolster
Pakistan’s flagging economy and perilously low foreign exchange
reserves.
Talks with the IMF began soon after Khan’s government was
appointed last August but a package has been held up by differences
over the pace and scale of reforms that Pakistan would be required
to undertake.
The IMF has pressed Pakistan to improve tax revenue collection,
bolster foreign currency reserves and narrow a current account
deficit expected to top 5 percent of gross domestic product this
year. The Fund has also pushed Pakistan to embrace a flexible rupee
policy. Pakistani officials fear these steps will further hurt
economic growth, cause of spike in the key interest rate and push
the Pakistani rupee further down.
“A market-determined exchange rate will help the functioning of
the financial sector and contribute to a better resource allocation
in the economy,” the IMF said in a statement issued after the
agreement.
“The rumors of further devaluation of (the) rupee against dollar
have squeezed the supply of the dollar and increased demand,”
said Zafar Paracha, general secretary of the Exchange Companies
Association of Pakistan. “Those holding dollars are not willing
to sell, anticipating gains on devaluation.”

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Source: FS – All-News-Economy
Pakistan rupee hits all-time low days after IMF bailout deal