The IMF has long indicated it believed the currency was overvalued and the Washington-based lender’s country mission chief, Harald Finger, is due to brief reporters Thursday afternoon in Islamabad after talks with Pakistani government officials last week.
With elections due in August, Pakistan’s Prime Minister Shahid Khaqan Abbasi has denied the nation will need IMF aid so soon after completing a $6.6 billion loan program last year that averted a 2013 balance-of-payments crisis. Some analysts still say that the nation will need financial support as its external position continues to worsen and exports — such as textiles — continue to trail regional peers.
Foreign-currency reserves slumped 29 percent to $12.9 billion in the year through October and in an effort to shore up its finances, Pakistan raised $2.5 billion in a dollar-denominated debt sale last month.
“It is the usual routine for Pakistan — hold the line on currency until the trade balance deteriorates, devalue, repeat,’’ said Paul McNamara, a London-based fund manager at GAM U.K. Ltd., that holds Pakistan bonds. Pakistan’s economy will be “more of the same — its not going to crash, not going to break out.’’
McNamara said his fund didn’t participate in the recent bond sale due to widening deficits.
The rupee’s slide prompted Pakistan’s parliament committee on finance to call in central bank Governor Tariq Bajwa, deputy governor and officials from the finance ministry on Dec. 19.
“We have got to know why this happened and on whose orders,” the committee’s Chairman Saleem Mandviwalla said in a statement.
The comment mirrors actions by Finance Minister Ishaq Dar, who blamed the central bank in July for “miscommunication” over the rupee’s 3.1 percent depreciation on July 5, and went on to appoint a new governor. Dar, facing corruption charges and arrest in Pakistan, was granted medical leave in London last month by Prime Minister Abbasi, who has taken over the finance portfolio.
“There is more focus on dealing with economic issues now,” said Waqar Masood, a former Pakistani finance secretary.
Pakistan is also targeting a 10 percent jump in exports this financial year after giving tax breaks to businesses, in a bid to reverse a three year slump and discourage imports by additional taxes on more than 700 “luxury” goods to put a lid on the widening trade deficit.
The rupee will stabilize around current levels before sliding gradually to 114 per dollar ahead of general elections in August next year, said Hamad Aslam, research director at Elixir Securities Pakistan Pvt Ltd. in Karachi.