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Rupee rallies as IMF board’s approval ease jittery investors

A file image shows a currency dealer counting $100 notes while Rs5,000 notes are placed on the table beside him. — AFP/File

KARACHI:  The Pakistani rupee snapped its losing streak and started gaining ground in the interbank market as the International Monetary Fund’s (IMF) executive board approved the revival of Pakistan’s Extended Fund Facility (EFF) programme a day earlier.

The local unit appreciated by Rs1.8 to settle at 220.12 against the US dollar in the interbank market, down from Monday’s close of 221.92, according to data from the State Bank of Pakistan (SBP).

After months-long hectic efforts, the global money lender approved the seventh and eighth reviews of the stalled $6 billion Pakistan programme, government officials announced Monday night.

Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha told that he expects the local unit to keep appreciating and fall to 200 in the coming days.

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Paracha highlighted that as the deal materialised after a long delay, the government took some measures for fiscal tightening that led to an increase in smuggling.

Apart from the smuggling of dollars to Afghanistan, Paracha said that the heavy regulatory duties imposed on imports led to an increase in the smuggling of commodities — which resulted in a shortage of dollars.

He noted that although the amount from the global money lender amounted to $1.1 billion, it will pave the way for Pakistan to get additional funds from other multilateral and bilateral organisations.

Paracha said that the foreign direct investment would also increase and expected that the overall economy would witness a boost in the coming days.

In a statement, the Fund announced that the executive board completed the combined seventh and eighth reviews of the “extended arrangement” under the Extended Fund Facility (EFF) for Pakistan.

“The board’s decision allows for an immediate disbursement of SDR 894 million (about $1.1 billion), bringing total purchases for budget support under the arrangement to about US$3.9 billion,” the statement read.

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The global lender also approved to increase the loan size and extended it till June 2023.

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