Tag Archives: IMF

Average US dollar to Rupee exchange rate to be Rs 173.53 by June 2020

 

ISLAMABAD:  The International Monetary Fund’s (IMF) underline assumptions suggest that the average exchange rate at the end of this fiscal year could be Rs 172.53 to a dollar – a depreciation of over 27%, due to weak macroeconomic fundamentals, reveals a latest report of the global lender.

In its staff level report, the IMF has not explicitly stated the exchange rate of Rs 172.53 to a dollar. But a backward working on the basis of current account deficit projections show that rupee would keep losing its value under the IMF programme and beyond it.  The average exchange rate of Rs 172.53 to a dollar by June 2020 means that the year-end rupee-dollar parity would be over Rs 188 to a dollar, said an independent economist who wished to remain anonymous.

The Rs 172.53 to a dollar average exchange rate would stoke the inflation that the IMF has estimated at 13%. The means that the annual inflation rate in this fiscal year is expected to soar to 18%.

Neither the spokesman of the finance ministry nor the central bank spokesperson commented for this article.

The average exchange rate that at the end of the fiscal year 2018-19 was Rs 135.4 to a dollar has been assumed at Rs 198.8 in fiscal year 2022-23 by the IMF. Against the average annual Rs 135.4 rupee-dollar parity, the actual rate was Rs 157 to a dollar by end of June.

IMF’s assumptions show a depreciation of Rs 63.4 to a dollar or 47% in four years (2019-2023). The total loss in the value of the rupee in five years would be Rs 78 or 64%, if the IMF assumptions are correct. The maximum depreciation is assumed in this fiscal year.

Due to steep currency devaluation, the size of Pakistan’s economy will be $312 billion at the end of Prime Minister Imran Khan’s term – a threshold that the country had once achieved in 2017. However, the devaluation has pulled the size down to $284.4 billion at the end of the first year of the PTI  government.

A “flexible market-determined exchange rate and tightening monetary policy by another 1.5%” were the prior actions for qualifying for the IMF programme. However, the IMF has a reason to believe that an overvalued exchange rate was harmful for Pakistan’s economy.

“The legacy of misaligned economic policies, including large fiscal deficits, lose monetary policy, and defence of an overvalued exchange rate, fuelled consumption and short-term growth in recent years, but steadily eroded macroeconomic buffers, increased external and public debt, and depleted international reserves,” said the IMF.

IMF to mobilize $38.6 billion from Pakistan’s international partners

 

The International Monetary Fund (IMF) supported program is expected to mobilize total financing of around $38.6 billion over three years from Pakistan’s international partners.

This has been stated in the IMF report titled ‘Request for an Extended Arrangement under the Extended Fund Facility’. Significant financial support by official and bilateral partners aims to provide an important safeguard.

The first 12 months are fully financed with the expected support from multilateral development banks and bilateral creditors as follows:

  • China $6.3 billion
  • Saudi Arabia $6.2 billion
  • UAE $1 billion
  • World Bank $1.3 billion
  • Asian Development Bank $1.6 billion
  • Islamic Development Bank $1.1 billion.

To support long-term debt sustainability, the authorities have also received firm commitments from key bilateral partners such as China, Saudi Arabia, and the UAE.

This will maintain their exposure throughout the program period and adjust the financing modalities to ensure that the new financing will be consistent with the program debt sustainability objectives by ensuring a manageable external debt servicing profile beyond the end of the IMF-supported program.

IMF approves $6 Billion bailout package for Pakistan

 

ISLAMABAD: The International Monetary Fund (IMF) on Wednesday approved $6 billion bailout package for Pakistan after the country agreed to enforce flexible exchange rate, enhance taxes and end circular debt –the weaknesses that have remained unaddressed despite availing nearly two-dozen programs.

The IMF will immediately disburse the $1 billion out of $6 billion total package. The remaining $5 billion will be linked with successful completion of quarterly and semiannual reviews, according to an announcement by the global lender.

The IMF Executive Board approved a 39-month extended arrangement under the Extended Fund Facility (EFF) for Pakistan for an amount of SDR 4.3 billion or about $6 billion or 210 per cent of the quota to support the authorities’ economic reform programme.

Pakistan already owes nearly $5.9 billion to the IMF and $750 million of them will be returned in new fiscal year 2019-20. The first review of on the implementation of the IMF programme may tack place in October in which the IMF will gauge performance on agreed targets for July-September 2019 period.

The Executive Board meeting that approved the programme was held in Washington. The programme is believed to be the toughest package in all 22 loans that Pakistan and the IMF have so far signed.

The IMF will monitor implementation on the programme through four quarterly reviews and four semiannual reviews that will keep the government of Pakistan Tahreek-e-Insaf (PTI) in a tight spot.

The PTI government has joined the league of the last two democratic governments of Pakistan Peoples Party (PPP) and Pakistan Muslim League-Nawaz (PML-N) that knocked the IMF door to avoid default on international obligations.

The programme will give much-needed stability to the economy besides opening closed avenues of borrowings from international capital markets to meet the growing financing needs.