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Thursday, November 21, 2024

IMF Deal Boosts Pakistani Rupee, but Recovery Will Depend on Reforms

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The Pakistani rupee appreciated by 11.1% against the US dollar on July 4, 2023, following the announcement of a deal with the International Monetary Fund (IMF). The rupee closed at Rs274.98 after losing Rs11.1 in the interbank during the intraday trade. It closed at 285.99 on June 27

The IMF deal is seen as a major step towards stabilizing Pakistan’s economy, which has been struggling under a severe balance of payments crisis. The deal will provide Pakistan with $1.17 billion in immediate funding, and it will also unlock other sources of financing, such as loans from the World Bank and the Asian Development Bank.

The appreciation of the rupee is a welcome development for the Pakistani economy. A stronger rupee will make it cheaper for Pakistanis to import goods and services, and it will also help to boost exports. However, it is important to note that the rupee is still trading at a significant discount to its pre-crisis levels. It will take some time for the rupee to fully recover, and the pace of recovery will depend on the implementation of the IMF reforms.

IMF Conditions

The IMF has set out a number of conditions for the deal, including tax increases, energy price hikes, and reforms to the government’s finances. The government has already announced some of these reforms, but it is unclear whether they will be enough to satisfy the IMF.

Government Response to IMF Conditions

If the government is able to implement the IMF reforms, the Pakistani economy is likely to recover in the medium term. However, if the government fails to implement the reforms, the economic crisis could worsen and the rupee could depreciate again.

The IMF deal is a positive development for Pakistan, but it is not a silver bullet. The government will need to implement the reforms agreed with the IMF in order to achieve sustainable economic growth. The future of the Pakistani economy will depend on the government’s ability to deliver on its promises.


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