Karachi July 17 2023: Pakistan Rupee lost against dollar both in interbank and open market as IMF euphoria comes to an end.
Pakistan Rupee lost PKR 1.16 (PST 12:40) against dollar to trade at PKR 278.75 against Friday closing of PKR 277.59 in interbank. In open market Rupee lost PKR 1.5 against Dollar to trade at PKR 285.5 against dollar.
The rally in international bonds issued by Pakistan has intensified over the past two weeks, seeing returns soar to above 45% year-to-date, making them some of the best performers in their asset class, according to JPMorgan data.
But the boost in the bonds belies the difficulties both nations face implementing major reforms once new leaders arrive after upcoming elections.
"Its not enough to resolve the country's issues – not nearly enough," said Carlos de Sousa, emerging market portfolio manager at Vontobel Asset Management said of Pakistan's recent funding gains, adding Argentina's challenges are also immense.
Pakistan's 11th hour deal for $3 billion from the International Monetary Fund (IMF), after months of talks got official approval this week. Saudi Arabia and the UAE followed with $2 billion and $1 billion infusions.
This fresh cash means Pakistan is unlikely to default on its debt in the next six to nine months, said de Sousa. Elections in the politically volatile country must be held by early November.
Reserves remain precariously low at $9.8 billion as of 7 July, only roughly two months of imports. JPMorgan pegs its external financing needs at greater than $30 billion.
Even in the near-term, Pakistan will have to stay on top of tricky reforms such as allowing its currency to move somewhat freely.