Cash-strapped Pakistan is unlikely to devalue its currency again as pressure on the rupee has eased, Fitch Ratings, a US-based American credit rating agency, was quoted as saying by Bloomberg in a report on Friday.
“We currently do not expect a large further devaluation of the Pakistan rupee,” said Krisjanis Krustins, a Hong Kong-based director at Fitch, in an emailed response quoted by Bloomberg.
“Although the currency has been very stable over the past few months, pressure on the reserves of the State Bank of Pakistan has also been contained, which suggests minimal interventions to support the currency,” Krustins said.
Since falling to the lowest level of 298.93 on 11th May, the Pakistani rupee has remained stable and has been hovering in the range of 284-287 in the inter-bank market. However, the currency has lost over 21% of its value this calendar year, making it one of the worst performers globally.
Moreover, the central bank’s foreign exchange reserves remain at under $4 billion, raising concerns on Pakistan’s ability to service its debt and pay off loans.
At the same time, Pakistan remains in talks with the International Monetary Fund (IMF) for resumption of the bailout programme, which has been stalled at the ninth review, while talks on the staff-level agreement have dragged on over securing necessary financing assurances to bridge the balance of payments gap.
“We continue to assume that the IMF and Pakistan will conclude the ongoing programme review, likely after the IMF has clarity on the budget,” Krustins said. “However, the window for this is rapidly closing, with the programme originally set to expire in June, and substantive progress unlikely in the immediate run up to elections due by October.”
Last month, Nathan Porter, IMF Mission Chief to Pakistan, said it is continuing engagement with the Pakistani authorities – focusing on restoration of foreign exchange proper market functioning, the passage of the fiscal year 2024 budget consistent with program goals, and adequate financing – to pave the way for a Board meeting before the current program expires at June-end.
The shortage of dollars has prompted talks of debt restructuring in Pakistan with Finance Minister Ishaq Dar on Saturday saying that the government is speaking to its bilateral creditors to restructure its debt.
“There is no plan to go to multilateral development institutions, requesting them to reschedule our debt,” he said during the post-budget press conference.
“However, we could negotiate bilateral loans and will talk to our bilateral partners after the budget process is over,” he said.