The rupee further recovered on Thursday, gaining 4.7 rupees against the dollar in the interbank market, after falling below 211 rupees on Tuesday.
Analysts are attributing the development to the $2.3 billion loan agreement that the Pakistan government has signed with a consortium of Chinese banks.
Pakistani rupee appreciated by 4 rupees to reach 206.50 rupees by mid-day, from the previous day’s close of 210.50 rupees. The currency subsequently closed at 207.23 rupees, appreciating by 4.7 rupees from Tuesday’s close of Rs211.93, according to the State Bank of Pakistan.
The news of foreign exchange inflows from China and the expected IMF deal is helping the rupee to gain strength, and it is expected to continue in the coming sessions, Mettis Global Director Saad Bin Naseer said.
$2.3 billion loan deal inked with China
Finance Minister Miftah Ismail revealed on Wednesday that Chinese banks have signed an agreement on a $2.3 billion commercial loan to boost Pakistan’s sliding foreign exchange reserves. The funds are expected to flow into Pakistan’s account within a couple of days, according to the finance minister.
“The Chinese consortium of banks has today signed the RMB 15 billion ($2.3 billion) loan facility agreement after it was signed by the Pakistani side yesterday”, Tweeted Ismail on Wednesday.
Pakistan’s depleting foreign reserves
Pakistan has been seeking a rollover of loans since February to support the fast-depleting foreign exchange reserves at the central bank. The reserves remain in the single digits, standing at $8.99 billion as of June 10.
Pakistan had repaid China’s $2.3 billion commercial loans in March in the hope to get it back in April. However, China had placed a condition that the money could not be used due to the weakening of the external sector position of Pakistan.
However, the commercial loans from Chinese banks will give it a boost once the money will be transferred into Pakistan’s account, opening blocked financing pipelines.
IMF Deal
Meanwhile, the coalition government has also reportedly reached an understanding with the International Monetary Fund on the federal budget for 2022-23 and expects IMF’s extended fund facility (EFF) to be revived soon.