Islamabad June 20 2023: Pakistan Rupee strengthened in open market against the Greenbank on higher inflows from abroad on the occasion of Eid ul Adha.
Pakistan Rupee gain 4.5 or 1.5 percent to trade at 293 against the dollar in open market (PST 13:10). Yesterday, rupee was closed at 297.5 in open market.
Moreover, Pakistan Rupee gain 5 paisa in interbank to trade at 287.21 against the dollar (PST 13:10). Yesterday, rupee was closed at 287.26 after falling 7 paisa or 0.02 percent in interbank.
“We will not default even without IMF and will pay our external payments on time as we did in the past” says Country Finance Minister Muhammad Ishaq Dar
Bloomberg reports that the International Monetary Fund’s criticism of Pakistan’s latest budget suggests chances are rising that the lender will opt not to deliver long-awaited aid before its bailout program finishes at the end of June. This would cause a severe dollar shortage in the first half of the fiscal year that starts in July, and possibly for longer — significantly raising the odds of default. It would also raise the prospect of much lower growth, and higher inflation and interest rates than we currently anticipate in fiscal 2024.
The IMF criticized the budget for not taking enough steps to broaden the tax base and for including a tax amnesty. We had expected the IMF to focus more on the primary surplus targeted in the budget.
The country’s FX reserves currently stand at $4 billion. With at least around $900 million in debt that must be repaid this month, the reserves will fall by June-end unless the IMF aid comes.
Between July-December, Pakistan must repay an additional $4 billion (which cannot be rolled over). With FX reserves likely below $4 billion at the start of fiscal 2024, default seems highly likely.
