The greenback is likely to decline in kerb and interbank markets this week as the State Bank of Pakistan (SBP) will receive 10th tranche of $497 million from the International Monetary Fund (IMF) under its Extended Fund Facility (EFF) by the end of this month.
The IMF had agreed to release a $497 million tranche for Pakistan after the latest review of a bailout package awarded in 2013.
A central bank official said: “Though the disbursement still requires IMF board’s approval, but there is hope that it will be released this week.”
After this installment, the IMF will still have to release $1.1 billion of the total $6.7 billion loan amount under the EFF programme. The last tranche of this agreement will be released in September 2016.
After receiving the IMF tranche, the dollar may depreciate in the open and interbank markets, dealers said. The dollar is already being traded lower, at Rs 104.77 for buying and Rs 104.87 for selling, in interbank market, while it closed at Rs 105.95 for buying and Rs 106.15 for selling in open market.
The central bank official said, “The dollar is stable in both markets due to the strict monitoring of the greenback.”
In the open currency market, the dollar reversed from Rs 106.70 mark during the last week of January and stabilised at Rs 105.80 since the start of February.
The reserves of the country which had touched almost $21 billion in December 2015 reduced to $20.388 billion till February 12. If the central bank receives the $497 million loan, the country’s reserves will increase to $20.885 billion.
To control the upward movement of the greenback in the first half of the current fiscal year, the central bank has allowed the exchange companies to import dollars from UAE and other neighbouring countries.
“Exchange companies are importing more than $5 million daily against other currencies to fulfill demand of Pakistani customers while the local banks are also cooperating with the money exchange companies,” said a money changer. The local currency is stable in the open currency market as there is no new demand of the greenback, he added.
If the State Bank received the IMF tranche of $497 million this week, the dealer said, the greenback may further decline in the near future against the local currency.
“All payments of the imports of oil and textile companies are being made on time as there is enough supply of the greenback in the interbank market,” said a banker of UBL. Almost $4-5 million demand is coming from the importers daily, he added.
“All end-December 2015 quantitative performance criteria, including the budget deficit target and the floor on the SBP net international reserves have been met,” IMF said in its report on February 4.
According to the report of a foreign news agency, Pakistan has shelved plans to privatise its national airline, PIA and nine power companies after a strike of its employees, but the Ministry of Finance rejected this perception.
The IMF had made clear its frustration with the delay to the privatisation drive.
Pakistan has already missed last year’s deadlines to solicit buyer interest in PIA, and the officials said the government had now informed the IMF it would miss the June 2016 deadline to conclude the sale of 26 per cent shares of the airline.