The recent strengthening of the Pakistani rupee against the US dollar to a five-month high can be attributed to several key factors, primarily the positive sentiments stemming from the International Monetary Fund (IMF) reaching a staff-level agreement with Pakistan on the second and final review of a $3 billion loan program. This agreement signifies progress in Pakistan’s economic reforms and signifies confidence from international financial institutions.
The interbank market closing at 278.4 rupees to the US dollar, its highest level since October 17, 2023, reflects the market’s optimism regarding Pakistan’s economic trajectory. Additionally, the slight appreciation of the rupee in the open market to 281.12 per dollar further indicates improved market sentiment.
The agreement between the IMF staff and Pakistani authorities paves the way for the release of the final $1.1 billion tranche, subject to approval by the IMF’s executive board. This injection of funds will bolster Pakistan’s foreign exchange reserves and provide further stability to the currency.
Furthermore, the improvement in Pakistan’s current account surplus, with a surplus of $128 million in February compared to a deficit the previous month, demonstrates positive momentum in the country’s external balances. The narrowing current account deficit for the fiscal year 2023-24 to $1 billion from $3.8 billion a year ago indicates progress in addressing structural imbalances.
