Despite IMF loan approval, Pakistani rupee falls further as political uncertainties mount

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Not with standing the financial assistance from the International Monetary Fund (IMF), the Pakistan rupee is under pressure due to uncertainties arising out of geopolitical as well as domestic political dynamics. On Tuesday, it hit a new low of 224 to a US dollar. Though Islamabad’s talks with IMF for a bailout package has concluded with the multilateral agency agreeing to provide $1.17 billion under the extended fund facility (EFF), disbursal of the same is yet to take place.</p>
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The political uncertainty has deepened after Shehbaz Sharif-led ruling PML-N suffered defeat in the Punjab by-elections at the hands of PTI. To add to the problem, Fitch Ratings has revised Pakistan's outlook to ‘negative’ from ‘stable’.</p>
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“The revision of the outlook to negative reflects significant deterioration in Pakistan's external liquidity position and financing conditions since early 2022. We assume IMF board approval of Pakistan's new staff-level agreement with the IMF, but see considerable risks to its implementation and to continued access to financing after the programme's expiry in June 2023 in a tough economic and political climate,” the rating agency said in a statement.</p>
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It warned that the renewed political volatility cannot be excluded and could undermine the authorities' fiscal and external adjustment, as happened in early 2022 and 2018, particularly in the current environment of slowing growth and high inflation.</p>
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The State Bank of Pakistan, the country’s central bank has not yet lifted the import restrictions imposed two months ago to save dollars, which many feel is an indication that the situation is yet to normalise.</p>
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“We had hoped that all restrictions on imports would be eased after the announcement of the staff level agreement with the IMF but it now seems that the restrictions will remain in place at least till the end of August,” the Express Tribune quoted a person, directly involved in the decision making, as saying.</p>