PKR in strong comeback fuelled by IMF deal, lower import bills, Qatar talks on PIA stake
The PKR had been through intense volatility through June and July, culminating in hitting the lowest point ever of 228 to the dollar. But in August, it’s all been about a comeback.
Dubai: The hot streak set by the Pakistan rupee this month has snapped, with the currency at 215 to the dollar and down from the high of 211 it had hit last week. But there’s enough buzz happening within the Pakistan economy for the PKR to remain relatively stable at these levels, according to market watchers.
Even then, it’s still quite a comeback from the brink situation for the PKR, which had dropped nearly 40 per cent this year to a series of new lows in June-July and hitting 228. The Pakistan rupee had started the year at 178.25.
Indeed, what’s happening in other spaces within the Pakistan economy will have a bearing on the rupee’s short- to medium-term prospects. There is talk about Qatar buying a sizeable stake in the flagship PIA (Pakistan International Airlines) and also a prized hotel – the Roosevelt – in Manhattan. This week, the government also lifted the import curbs on luxury goods, which had been done to save as much of the dollar reserves as possible when the economy – and the PKR – was going through a crisis.
Above all, there is the anticipation of the IMF releasing new funds imminently as more of the pre-conditions are met by the government. “The PKR’s smart rally this month comes on the back of news that all conditions for the IMF have been met along with a significant reduction in Pakistan’s current account deficit,” said Sameer Lakhani, Managing Director at Global Capital Partners.
It’s all changing for PKR
“A few weeks ago, the Pakistan rupee was in a free fall due a bleak current account position,” said Muhammad Nafees, Vice-President for Finance, at Pakistan Business Council, Dubai. “As soon as IMF confirmed the approval of an economic assistance package, the rupee started stabilizing”.
FX observers say that Pakistani expats in the UAE had benefitted immensely from the extended weakness of the rupee since March, which was when the pace of depreciation accelerated. They say anything in the 210-215 range will be a positive for remittances. And that the current levels still represent a major dip from the 178/179 levels in January.