Pakistan set to allow rupee depreciation

islamabad — Pakistan has decided to allow a rupee depreciation after crucial talks with the International Monetary Fund (IMF), a media report said on Saturday.

The Pakistan government and an IMF delegation on Friday concluded the first round of discussions on the country’s economy and the sides are on a two-day break to prepare for the policy-level wrap-up by December 13-14.

A senior official told the Dawn that the State Bank of Pakistan (SBP) would now let the currency exchange rate adjust to market conditions after years of resisting expectations.

The timing of the move was planned to ensure the materialisation of $2.5 billion worth of receipts from two international bonds launched last month.

This calculated move allowed the currency rate to touch Rs110 to a dollar on Friday before settling down at around Rs107 and did not go beyond official estimates.

The two weekend holidays would give breathing space instead of over-steaming the exchange rate.

Sources said the IMF had concerns over the health of Pakistan’s external sector, but government authorities had a different opinion.

As the two sides concluded technical talks, the IMF team will prepare a report of its assessment over the weekend and share it with Pakistani officials on Monday for the feedback and discussions.

While the government team, led by Secretary of Finance Shahid Mehmood, will review the assessment, the IMF mission to Pakistan, led by Harald Finger, will visit Lahore this week for talks with provincial authorities, including Punjab Chief Minister Shahbaz Sharif and independent observers and researchers from the business community and representatives of a private-sector university.

The authorities believe the currency adjustment would help shift foreign currency holdings from commercial banks currently standing at a higher level of around $6 billion back to official reserves and help divert remittances to official channels with declining gap among the official, banking and open market rates.

For the first time in many months, the central bank is reported to have noticed exporters offloading their positions.

In the long run, the recent imposition or increase in the import duties and regulatory duties would make unnecessary imports expensive. — PTI