Karachi March 2 2023: Pakistan Rupee depreciates both in Interbank and Open market against dollar as country failed to reach agreement with IMF even after passing 21 days of staff level visit.
IMF demands free float exchange rate and increase in revenues along with circular debt management plan and removal of subsidies for the resumption of agreement.
Pakistan Rupee depreciates PKR 18.97 or 6.6 percent in Interbank to close the trading at PKR 285.08 on Thursday. During the week Rupee lost PKR 25.09 or 8.8 percent against the dollar in Interbank.
In open market rupee is trading at 289.15 at PST 15:33 against yesterday closing of 274.15.
Bondholders are bracing for a potential default by Pakistan as the beleaguered nation faces billions of dollars in debt repayments that it will struggle to make good on without a bailout from the International Monetary Fund or rollovers from bilateral creditors, reported by Bloomberg.
The nation’s dollar bonds slid to the lowest level since November on Thursday as investors weigh its ability to honor $7 billion of repayments in the coming months, including a Chinese loan of $2 billion due in March, according to Fitch Ratings.
Moody's Investors Service ("Moody's") on Tuesday downgraded the Government of Pakistan's local and foreign currency issuer and senior unsecured debt ratings to Caa3 from Caa1. Moody's has also downgraded the rating for the senior unsecured MTN programme to (P) Caa3 from (P) Caa1.
The decision to downgrade the ratings is driven by Moody's assessment that Pakistan's increasingly fragile liquidity and external position significantly raises default risks to a level consistent with a Caa3 rating.
In particular, the country's foreign exchange reserves have fallen to extremely low levels, far lower than necessary to cover its imports needs and external debt obligations over the immediate and medium term. Although the government is implementing some tax measures to meet the conditions of the IMF programme and a disbursement by the IMF may help to cover the country's immediate needs, weak governance and heightened social risks impede Pakistan's ability to continually implement the range of policies that would secure large amounts of financing and decisively mitigate risks to the balance of payments.
The forthcoming meeting of the Monetary Policy Committee has also been preponed and now it will be held on Thursday, March 02, 2023 to reduce the uncertainty in the market about rate hike, according to State Bank of Pakistan.
An International Monetary Fund (IMF) mission led by Mr. Nathan Porter visited Islamabad during January 31 – February 9 to hold discussions under the ninth review of the authorities’ program supported by the IMF Extended Fund Facility (EFF) arrangement.