In a remarkable turnaround, the Pakistani currency experienced a notable recovery of approximately 5.5%, equivalent to Rs16, in just one day. The currency reached a one-week high at Rs295 against the US dollar in the open market, around midday on Thursday.
The previous day, the currency had closed at Rs311 against the US dollar, as reported by the Exchange Companies Association of Pakistan (ECAP).
As a result, the gap between the rupee-dollar exchange rates in the interbank and open markets significantly narrowed down to about Rs10, compared to the previous day’s difference of around Rs27.
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In the interbank market, the Pakistani currency has maintained stability around Rs285 per US dollar over the past couple of weeks.
IMF has advised the government to give the restoration of normal operation in the foreign exchange market top priority due to the growing disparity in the value of the Pakistani rupee between the interbank and open markets.
This substantial correction in the open market became possible after the central bank authorized commercial banks to purchase US dollars from the interbank market for settling international payments made through credit cards by their clients.
Previously, these banks were buying an average of $10 million per day from the interbank market to settle credit card payments in overseas markets.
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The demand from commercial banks had nosedived the currency to a record low at Rs312/$ in the open market on Tuesday.
ECAP General Secretary Zafar Parachs had predicted a massive correction in rupee-dollar parity in the market after the central bank allowed banks to purchase dollars from the interbank market on Wednesday.
He said the currency would recover by around Rs20-25 over the next couple of days, including a recovery of Rs15-20 on Thursday (today).
Earlier, financial experts anticipated another round of rupee depreciation of 5-10% to Rs300-310/$ in the interbank market to narrow down the spread between interbank and open markets ahead of the revival of the IMF loan programme before it officially expires on June 30, 2023.
The currency has continued to remain under pressure against the US dollar amid the depletion of foreign exchange reserves to a critically low level of $4.2 billion.
On the other hand, Pakistan is to repay foreign debt worth $3.7 billion in the ongoingly month of June.
The low reserves and the scheduled debt repayments have increased the risk of the country’s default on international payments after June 2023 if the IMF programme remains stalled.
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