The Pakistani rupee has gained over 1% against the US dollar in interbank trade on hopes of a revival of the International Monetary Fund (IMF) bailout. The IMF has received confirmation from Saudi Arabia on $2bn in additional deposits, raising hopes of an early signing of the agreement. Islamabad has been negotiating with the IMF since January for the release of $1.1bn from a $6.5bn bailout package agreed in 2019. To unlock the funding, Pakistan has cut back on subsidies, raised fuel prices, and added taxes. However, assurances from friendly nations for additional funds have delayed the agreement. Finance Minister Ishaq Dar is due to visit the UAE on his way to the US to hold talks on the release of funds.
Analysts have said the rupee’s recovery is a positive development and see the local currency as resilient in the days to come if inflows are ensured. However, the foreign exchange reserves held by the State Bank of Pakistan (SBP) stand at a critical level of $4.2bn, which is barely enough to cover one month’s imports.
Meanwhile, the US dollar has slightly gained worldwide but remains near a two-month low as traders weigh how the upcoming US jobs data will impact Federal Reserve policy. The soft economic data has added to fears of a recession in the world’s largest economy, leading traders to seek safe-haven assets.