The rupee maintained its recovery against the dollar as it appreciated to a two-week high of 197.7 in intra-day trading in the inter-bank market on Wednesday.
This is the highest level for the local currency after May 18, when it closed at 198.39 per dollar. The rupee has been recovering against the greenback ever since the government partially removed fuel subsidy and hiked prices of petroleum products by Rs30 per litre.
The move signalled its willingness to resume the stalled International Monetary Fund (IMF) programme.
On Tuesday, the rupee closed at 198.46 after a day-on-day appreciation of 60 paisas or 0.30%.
Alpha Beta Core CEO Khurram Schehzad said the rupee has been witnessing robust recovery over the past few sessions, which meant Pakistan was receiving dollar payments in form of exports proceeds, remittances or Roshan Digital Accounts.
Market analysts also said positive speculation surrounding the IMF deal and hopes of its revival was driving optimism in the market.
In addition, they said the government’s efforts to curb the import bill by banning inward shipments of non-essential items also contributed to the uptrend in local currency.
“The government’s decision to partially reduce the subsidies given on petroleum products has taken away some pressure in the currency market, indicating a resumption of the stalled IMF programme,” Wajid Rizvi, Head of Strategy and Economy at JS Global, told PEN.
However, he said the rupee “has already lost a lot of ground due to delays in decision making, and it will be difficult for it to appreciate to the 185 level,” he said.
Last week, talks between Pakistan and the IMF for the 7th review under the $6 billion Extended Fund Facility (EFF) programme remained inconclusive, as the Fund pointed out “deviations” on fiscal sides from the policies agreed in the last review. Resultantly, no staff level agreement was reached while the revival of $6 billion EFF was delayed.
The fund emphasised the urgency of concrete policy actions, including in the context of removing fuel and energy subsidies and the fiscal year 2023 budget, to achieve programme objectives. The IMF statement indicates that the government would be taking prior actions in the federal budget for fiscal year 2022-23. The revival of stalled programme can be expected by end of July/August 2022.