Dollar hits record-high vs rupee on IMF loan repayment

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Forex Research - Daily US Dollar Report

The dollar hit a record-high level against the rupee in the interbank on Monday when the greenback was traded at Rs 95.05 due to repayment of the fifth instalment of $109 million to the International Monetary Fund’s (IMF) under Stand-by Arrangement (SBA) facility, officials of Habib Bank and Standard Chartered said.

 

The rupee weakened in the interbank market against the dollar while it closed at Rs 95.10 against the greenback in the open market. However, according to the State Bank, the dollar closed at Rs 94.92. Pakistan has repaid the International Monetary Fund’s (IMF) fifth instalment of Stand-by Arrangement (SBA) facility of $109 million, said an official in the Ministry of Finance.

 

are being carried out for a meeting of IMF officials and Pakistan’s finance managers, the MoF sources added. The repayment of IMF’s SBA loan is among the factors that put pressure on the rupee, resulting in strengthening of the dollar.

 

The local currency sank by Rs 10.90 against the dollar at the start of new fiscal 2012-13 on back of pressure on foreign reserves, low import bill volumes and high demand for dollar in the local currency markets mainly for the import of crude oil, palm oil, industrial raw material and commodities. The country also witnessed a fall in foreign exchange reserves, which were down at 27-month low to $14.8 billion with widening current account deficit nearing around $4.2 billion, a currency expert said.

 

The rupee has depreciated by more than 7.9 percent so far since the beginning of the current financial year on swelling imports bill and payment of IMF SBA facility instalments, said currency expert in Texas USA, Fazal Ahmad.

 

Huge government borrowing from the State Bank of Pakistan and absence of foreign inflows in the economy are also one of the major reasons for downtrend in local currency value.

 

The rupee will likely set a new record in the next financial year on the pressure of macro-economic indicators, said Ahmad.

 

Pakistan will likely go to the IMF in the middle of fiscal year 2012-13 to seek loan for the retirement of IMF’s SBA facility, he said. The country will have to pay more than $7.8 billion in four different instalments from FY 2011-12 to 2014-15, sources said.

 

Pressure on foreign exchange reserves was also affecting the overall economy of the country.

 

Pakistan has to pay $3.4 billion in FY 2012-13, $3.43 billion in FY 2013-14 and FY $1.35 billion in 20114-15 to retire IMF’s outstanding amount, he said.

 

Pakistan would possibility face a 4.5 percent to 5.5 percent increase in value of IMF loans repayment due to dollar-rupee parity in the next three to four years. The economy of the country has been badly hit by huge government borrowing, power and gas crisis and uncertain political and law and order situations.

 

The coming months till December 2012 are vital for the government as the economic indicators are not favouring the country’s economic situation, said analysts. During the current fiscal year Pakistan has made debt payments amounting to more than $2.158 billion (inclusive of $809 million to IMF) and other miscellaneous payments of $1.52 billion, while receipts from multilateral and other donors amounted to $1.21 billion.

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