Rupee seen sturdy on anticipated IMF visit

• IMF mission expected to visit Pakistan on May 15 for new loan.
• Finance minister Aurangzeb says govt in talks with global lender.
• Trader says no significant changes expected in value of rupee.

KARACHI:As the International Monetary Fund’s (IMF) mission is likely to visit Pakistan this month for a new loan programme, the rupee is expected to remain sturdy in the coming days, The News reported citingtraders and analysts on Sunday.

A mission from the Washington-based lender is expected to visit Islamabad on May 15 to finalise the key components of the next bailout package under the $6–$8 billion Extended Fund Facility programme.

Finance Minister Muhammad Aurangzeb said that the government was in talks with the global lender for a new programme, adding that Pakistan might strike astaff-level agreement by the start of July.

“We do not anticipate any significant changes in the value of the rupee in the coming sessions. This is because the demand and supply of US dollars are balanced, and there is a positive outlook on Pakistan’s economy,” said a foreign exchange trader.

“The market sentiment has been bolstered by recent positive signals from the IMF and the visit of Prime Minister Shehbaz Sharif to Saudi Arabia,” the trader added.

The local currency saw fluctuation this week as it closed the week on278.20 against the greenback on Friday. It gained ground against the dollar due to the release of a$1.1 billion last tranche from the IMF under the $3 billion stand-by arrangement.

Meanwhile, the reserves held by the State Bank of Pakistan (SBP) reached the $9 billion mark following the IMF’s disbursement.

According to Tresmark, the rupee was poised to remain stable even without the rate cut, therefore,the lack of the cut only cements this outlook.

“Our outlook on the rupee remains unchanged where we see the local currency range-bound till June, after which we should expect a 2-rupee per month depreciation over the next 6 months, with December 2024 closing in the 292-295 range,” it said.

The central bank on Monday kept itsbenchmark interest rate unchanged at a record 22% for the seventh consecutive time.

For the longest time, the SBP’s Monetary Policy Committee (MPC) emphasised that real interest rates on a “forward-looking basis” were positive and so didn’t feel that a hike was required, even when inflation soared above 30%, said Tresmark.

For the last two months, real interest rates have been materially positive on a present basis, and yet there was no cut. The SBP brought in a new line of “inflation target of 5-7% by September 2025.”

Tresmark said that this shift from forward looking to inflation target has left traders confused due to several reasons.

“This shift from forward looking to inflation target has left traders confused especially in the back drop of 1. Fed pivot towards ‘higher for longer’ 2. IMF starting a review for a brand new package in mid May and 3. Inflation projections for May and June are plateaued around 16-17% (that means we wont see a significant drop in inflation),” it added.

“Analysts from different quarters now demand that the Central Bank give forward guidance to accompany the MPS [monetary policy statement] to avoid speculation and smother volatility,” said Tresmark.