In the interbank market, the rupee appreciated further against the dollar

A foreign currency dealer counts US dollars at a shop in Karachi, Pakistan, May 19, 2022. — AFP/ file

Pakistani Rupee on Monday, it strengthened further against the US dollar in the interbank market for the second trading session in a row.

As the greenback lost Rs 3.46 against the rupee, the local currency settled at Rs 275 in mid-day trade at around 10:14 am.

on Friday, a recovery of Rs after a day sharp decline against the dollar, as Pakistan’s financial market rests on assurances given by Finance Minister Ishaq Dar this week on a long-stalled deal with the International Monetary Fund (IMF).

The local currency gained 6.63 rupees, or 2.38%, to close at 278.46 rupees per dollar in the interbank market, the State Bank of Pakistan (SBP) said on Friday.

In an interview with The News, Secretary General of the Exchange Companies Association of Pakistan (ECAP), Zafar Paracha, cited several reasons for the previous appreciation of the dollar, saying that the panic was created by the country’s financial institutions and international players, which caused the rates to rise.

“Currently, the dollar has fallen due to the market correction against the rupee, and it is still falling. Financial data cannot change overnight, which may cause the currency to depreciate or rise to such an extent,” Paracha said.

A destabilized currency would damage Pakistan’s image and foreign direct investment (FDI) and therefore local investors would be discouraged, he said.

He predicted that the dollar should stay between 260-265 given the IMF agreement and inflows from friendly countries.

Paracha also said that Pakistan’s political situation has had an unprecedented impact on the dollar. This time we are very weak, that’s why the IMF is pushing us, he said.

He also noted that the financial situation is not bad. Our inflow is $50 billion and our outflow is $60 billion, he said, adding that Pakistan needs $10-15 billion that has been suspended.

“If we manage it well, reduce our spending and the $17.4 billion in subsidies that the government gives to our elite, it would have a big impact,” he said.

It is necessary to increase the tax base, not the tax rate. Nobody pays taxes except wage earners and big companies. Therefore, the government needs to increase the tax base, he concluded.

This morning, a government official said he hoped to reach an agreement with the lender in Washington.

Another official confirmed that Pakistan will sign a Staff Level Agreement (SLA) with the IMF in the next few days, although the Fund declined to give any time frame for finalizing the agreement.

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