© Reuters. FILE PHOTO: A currency dealer counts Pakistani rupee notes as he prepares to exchange US dollars in Islamabad, Pakistan December 11, 2017. REUTERS/Caren Firouz/File Photo
By Ariba Shahid and Asif Shahzad
KARACHI, Pakistan (Reuters) – Pakistan’s rupee showed signs of stabilizing on Friday after falling sharply over the previous two days, with hopes boosted by an International Monetary Fund team due to visit Islamabad in the coming days to discuss resuming aid payments.
On Thursday, the Pakistani rupee fell 9.6% against the dollar on the interbank market, the biggest one-day drop in more than two decades, a day after exchange firms removed the exchange rate cap.
But on Friday, the rupee recovered from an early 1.8% drop to fall just 0.2% to trade between 255-259 rupees per dollar.
In the open market, the rupee fell 1.1% to trade between 263-265 to the dollar, according to data from the Pakistan Exchange Association.
The lifting of the cap by exchange firms should bring Pakistan closer to a market-determined exchange rate regime backed by the IMF, although the multilateral lender also wants to see the government’s fiscal measures to reduce the budget deficit.
Hours after the rupee was left to market forces to decide its value, the IMF announced that its delegation would visit Pakistan from January 31 to February 9 to discuss its 9th review of the $6 billion aid package agreed in 2019 and topped up to $7 billion last year.
“As we have seen the announcement, and the IMF program has continued, we should be, God willing, good,” former finance minister Miftah Ismail told Geo TV, adding that this will prevent the risk of Pakistan defaulting on its external commitments. .
Payments from the package were suspended in November due to a lack of progress in fiscal consolidation, hastening Pakistan’s slide into a balance of payments crisis, with foreign reserves currently able to cover only three weeks of imports.