| ISLAMABAD:
Pakistan is likely to seek a waiver from the International Monetary Fund (IMF) for violating the condition of restricting the difference between inter-bank and open market currency rates as the lender improves its assumption for the average dollar price to Rs300.
Highly placed sources said that compared to July’s underlying assumption of Rs305.2 to a dollar, the IMF “is now assuming the average price of US currency at a little below Rs300 by June next year”.
They said that due to the breach of the condition of keeping the gap between currency rates at banks and foreign exchange companies at 1.25%, Pakistan would have to secure a waiver from the IMF board for qualifying for the next loan tranche. It is expected that Pakistani authorities will win the wavier as the global lender seems positive about gradual improvements in the currency exchange market.
Pakistan and the IMF have already concluded a staff-level agreement that will be followed by the board’s approval next month before the release of a $700 million tranche. Central bank spokesman Noor Ahmed did not reply to a question about the need for IMF waiver.
Under the $3 billion standby arrangement, the IMF had placed a condition to restrict the gap between inter-bank and open market exchange rates to just 1.25% aimed at ending Pakistan’s administrative control over the rupee. However, the gap at one point increased to as high as 8% before returning to the given range on the back of a crackdown by the authorities.
State Bank of Pakistan (SBP) Governor Jameel Ahmad said a few days ago that during the past couple of months, the central bank had cleared most of the backlog related to repatriation of profits and import payments on the back of better inflows and improved foreign exchange reserves.
However, the reserves still stand low at $7.4 billion and the government is required to increase them to $9.1 billion by June next year, according to the sources. The $9.1 billion level was agreed during the recent review talks, they said. The lender sees the exchange rate moving in the right direction but wants Pakistan to ensure complete return to the market-based exchange rate.
Sources said that the latest IMF assumptions suggested that the average exchange rate could be less than Rs300 to a dollar at the end of current fiscal year in June 2024.
This rate is lower than that used for the IMF’s July staff-level report. This marks a directional change as the lender has now further lowered the rupee value compared to its July assumption.
Neither the IMF gives the exchange rate explicitly nor is there any agreed rate between Pakistan and the lender. The underlying assumptions are used to work out the current account deficit, suggesting that the IMF has priced the dollar at an average rate below Rs300. |
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