Amid financial crisis, Pakistani rupee set for worst month in 2 years

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The Pakistani rupee is poised for its biggest monthly decline in more than two years as deteriorating finances and uncertainty surrounding the International Monetary Fund bailout weigh on the currency.

The Pakistani rupee fell around 7% in May, the biggest drop since March 2020, as the country negotiates a bailout with the IMF and others to keep its economy afloat. Analysts expect the currency to remain under pressure even though the government has taken steps to meet IMF demands.

Pakistan needs about $36 billion to $37 billion in funding for the fiscal year starting in June, Finance Minister Miftah Ismail said last week. Morgan Stanley estimates the funding shortfall will be $8 billion this calendar year. An IMF bailout has become critical as countries that have traditionally been generous lenders are now acting more cautiously.

“Pakistan’s funding needs for the coming year will be met, but it will be quite tight, and that will keep the rupee under pressure,” said Saad Khan, head of research at IGI Securities Ltd. in Karachi.

Also Read: Value of Pakistani Rupee Hits All-Time Low of Rs 200 Against US Dollar

IGI and Ismail Iqbal Securities Pvt. predict that the rupee will fall to 220 per dollar by the end of the year. It closed at 199.06 to the dollar on Monday.

Pakistan is seeking a staff-level agreement with the fund in June to release the remaining $3 billion from its loan program. He also asked to increase the amount of the loan by $2 billion. It faces $3.2 billion in debt owed this year, the highest amount in the next decade, according to data compiled by Bloomberg.

“The currency could start to stabilize in the short term with a sense of risk, but we still expect it to weaken in the longer term,” said Raphael Mok, head of country risk for Asia at Asia. Fitch Solutions in Singapore. “Pakistan still has a large current account deficit and will remain dependent on external financing conditions.

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