KARACHI
Pakistani rupee continued making gains against the US dollar in the interbank market for the ninth week in a row and improved by Rs1.04.
According to details, the rupee opened at 281.40 against the greenback in the interbank market on Monday last and closed at 280.36 on Friday, registering a rise of 0.37 percent week-on-week. Overall, the local unit has improved by Rs6.67 during the previous nine weeks.
Similarly, the rupee improved by Rs7.93 during the current fiscal year 2023-24 and Rs1.5 in the current year. The rupee gained Rs3.31 against the US dollar in December, while it shed Rs3.69 against the US dollar in November after gaining Rs6.26 (+2.23 percent) against the greenback in the month of October. The currency surged more than 6 percent in September.
Following suit, the local unit advanced against the greenback in the open market and closed the week in the range of 280.95 for buying 281.20 for selling, according to data provided by different exchange companies. The rupee has gained Rs1.5 against the greenback in the previous three weeks while it gained Rs3.50 in December.
During the week, the Executive Board of the International Monetary Fund (IMF) completed the first review of Pakistan’s economic reform programme supported by the IMF’s staff-level agreement (SLA) on Thursday. The Board’s decision allowed for an immediate disbursement of SDR 528 million (around $700 million), bringing total disbursements under the arrangement to SDR 1.422 billion (about $1.9 billion).
Pakistan is likely to get the second $700 million tranche this week. This bodes well for the nation’s flagging economy in the run-up to next month’s elections. According to analysts, the IMF board’s decision would instil some confidence in other lenders and markets amid the unpredictability surrounding Pakistan’s upcoming elections.
Meanwhile, the six-month interbank rate fell to its lowest level in 10 months on Thursday. The six-month Karachi interbank offered rate (KIBOR), which serves as a benchmark for corporate lending, dropped to 20.98 percent, the lowest since March 2023. The decline in the KIBOR followed a sharp fall in the cut-off yields of treasury bills at an auction on Wednesday, where the government raised Rs284 billion, much more than the original target of Rs100 billion. The yields on all tenors – three, six and 12 months – fell below 21 percent, indicating a significant deviation of over 100 basis points from the SBP’s current policy rate of 22 percent. There was a notable decrease in the cut-off yields, which varied from 44 basis points (bps) to 59 bps.
On the other hand, Pakistan’s sovereign international dollar bonds rose on Thursday. The bonds rose by up to 1.77 cents, with the 2026 bonds rising the most to 70.79 cents on the dollar, according to Tradeweb data.
In another related development, the country’s total liquid foreign exchange reserves increased by $36 million during the last week due to a surge in commercial banks’ reserves. The total liquid foreign exchange reserves held by the country stood at $13.257 billion as of January 5, 2024 compared to $13.221 billion as of December 29, 2023. The break-up of the foreign reserves position shows that SBP’s reserves decreased by $66 million to $8.155 billion due to debt repayments. However, net foreign reserves held by commercial banks rose by $102 million to $5.102 billion from $4.999 billion.
