Top Currency Dealer Makes Big Prediction About Rupee’s Value
The rupee has been slowly falling in value due to Pakistan’s ongoing economic unrest, and the situation won’t get any better unless the government unlocks crucial International Monetary Fund (IMF) money and increases its tax base in addition to drastically cutting spending.
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The Shehbaz Sharif-led government is finding it difficult to adhere to the “tough” criteria, which the Washington-based lender is demanding Islamabad to fulfil. The inflation has already reached a historic high.
Even though Pakistan’s Finance Minister Ishaq Dar has assured the nation’s weary of inflation citizens that he plans to sign the staff-level agreement with the IMF next week, the Fund has made another significant demand: peg the rupee’s interbank market rate to the incredibly high rate currently in effect at the Afghan border (also known as the Peshawar market).
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“The interbank rate should be tied to the rate that is in effect at the Afghan border, per the IMF’s request. In other words, the IMF is requesting that our interbank rate match the grey market rate “According to Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan (ECAP), TheNews.com.pk.
According to the top currency trader, if one pays attention to the demands made by the Washington-based lender, it is plausible to believe that the Fund has urged Pakistan to peg the rupee to the rate currently in effect on the black market.
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On Thursday, the rupee had a sharp decline of Rs18.98 in the interbank market before closing at 285.09, while in the open market, it dropped to 288. But, according to Paracha, the dollar traded hands at roughly 300 on the black market.
The ECAP official predicted that the rupee will lose another Rs. 4-5 during Friday’s session and that it will cross the $300 threshold in the next days, in keeping with the Fund’s desire that the exchange rate be determined by the market.
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If the economic crisis continues, things could get lot worse.
The currency dealer continued, saying that if the much awaited sale goes through soon, it will be a lifeline for Pakistan as the money will allow the government enter the “financial route”.
Friendly nations and other international organisations have requested Pakistan to make sure it obtains an IMF loan before they give it any funding, not before.
According to Paracha, if everything works out and we are able to raise $15 billion from the IMF, the World Bank, the Asian Development Bank, and our donors’ conference, the dollar should drop to approximately 260.
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While elaborating on the additional factors that contributed to the rupee’s value decline, he claimed that the limitations placed on the exchange of foreign money forced people to use illegal channels like hundi and havala, which grew the black market.
He urged the administration to evaluate its policies, noting that the exceptional circumstance required the government to “pull up its socks.” “Unfortunately, these are the same mistakes that Sri Lanka made and it defaulted,” he said.
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