- Rupee appreciated by 9.5pc after hitting Nov 28’s lowest Rs 110.10
- IMF says appreciation pressure reflects improving current account prospects
The International Monetary Fund (IMF) has suggested a flexible exchange rate for Pakistan as the Rupee dramatically appreciated against the US dollar by 9.5 percent to Rs 99.70 on the interbank market as of Thursday after depreciating to a historic Rs 110.10 level on November 28 last year.
“On the issue of Pakistan’s exchange rate, I can say that we firmly believe that Pakistan is best served by a flexible exchange rate,” Gerry Rice, a director at IMF’s communications department, told a briefing he held in Washington Thursday while responding to an online question from Pakistan.
Friday saw the improving dollar trading at Rs 101 and Rs 98.52 on the kerb and interbank markets, respectively. For Monday the central bank has notified Rs 99.38 as the interbank exchange rate.
A “webcast” of the press briefing on IMF’s website quoted Rice as viewing that a flexible exchange rate would allow the rupee to find a market-based equilibrium.
His statement came in response to a query that if the Fund, the largest multilateral lender to Pakistan, deemed the current value of the rupee as real against the dollar. “Is it overvalued, undervalued,” the questioner asked.
In his brief but positive reply Rice said the recent appreciation pressure seemed to reflect Pakistan’s improving current account prospects and better capital inflows. “Both welcome developments,” he added.
With the country’s current account deficit widening beyond $ 2 billion during July-June FY14 compared to last year’s $ 441 million gap, the economic managers in the resource-constrained Pakistan are foreseeing more inflows from bilateral and multilateral foreign funders in the months ahead.
Finance Minister Ishaq Dar has attracted immense appreciation for materializing his boastful pledge of bringing the dollar back to Rs 98 level through arresting further reduction in the country’s depleted foreign exchange reserves.
“The $ 1.5 billion Inflow from Saudi Arabia is the major factor behind this sudden appreciation in rupee,” views InvestCap analyst Abdul Azeem.
