Despite the tumultuous state of Pakistani politics and economy, the local currency managed to maintain stability, closing at approximately Rs285 against the US dollar in the interbank market on Tuesday.

The State Bank of Pakistan (SBP) reported a slight increase of Rs0.01, with the currency settling at Rs284.96 against the greenback compared to the previous day’s close.

According to the Exchange Companies Association of Pakistan (ECAP), the local currency weakened by Rs1 in the open market, reaching Rs292/$ compared to Rs291/$ the day before.

For several weeks now, the currency has remained steady around Rs285/$, except for a brief period (May 10-11) when it hit a new all-time low at Rs299/$ due to heightened political drama and widespread law and order issues following the arrest of former-prime minister Imran Khan.

Market experts suggest that the supply of US dollars in the interbank market has improved in comparison to demand. The government’s efforts to cut imports to less than $3 billion per month in April, through administrative controls, have contributed to this shift. Previously, imports had reached an all-time high of $8 billion.

This strategy was implemented by the government due to critically low foreign exchange reserves, currently standing at $4.4 billion, and the high risk of default on foreign debt repayment. Moody’s Investors Service has even warned of a possible default after June 2023.

In the next fiscal year, FY24, Pakistan is set to repay $25 billion in foreign debt, including $15 billion that can potentially be rolled over by friendly countries such as China, Saudi Arabia, and the United Arab Emirates (UAE).

Experts emphasise that it is crucial for Pakistan to resume its International Monetary Fund (IMF) loan programme worth $6.7 billion in order to improve its international payment balance, gradually reopen imports, and allow the economy to regain momentum. The programme has been stalled since November 2022.

However, the IMF has maintained its condition that Pakistan must secure commitments from friendly countries for fresh loans totalling $6-7 billion before June 30, 2023.

So far, Pakistan has received commitments amounting to $2 billion from Saudi Arabia and an additional $1 billion from the UAE alone.

Published in The Express Tribune, May 17^th, 2023.

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