Pakistani rupee broke a seven-day losing streak on Friday as it made a slight recovery of 0.03% (or Rs0.07) to close the day at Rs220.84 against the US dollar in the inter-bank market.
The recovery came in the backdrop of a $1.5 billion loan approved by the Asian Development Bank (ADB). Earlier, the currency dropped by 1.45% (or Rs3.16) in seven successive working days.
Experts said that the rupee would continue to move in the range of Rs215 to Rs225 to a dollar in the short to medium term, but it would depreciate to Rs240-250 by the end of the current fiscal year on June 30, 2023.
The ADB is expected to release the new loan for Pakistan sometime next week. Besides, the Asian Infrastructure Investment Bank is also scheduled to provide a loan of $500 million later this month.
The borrowing will help cushion the dwindling foreign currency reserves, which have continued to shrink over the past five months. The stability of foreign currency reserves will prove positive for the rupee as they will enhance the country’s capacity to make import payments as well as foreign debt repayment.
The inflow of foreign currency should also soothe the jittery foreign investors who have invested in Pakistan’s US dollar-denominated bonds – Eurobond and Sukuk – in the international capital market.
A spike in bond yields (rate of return) to around 147% on Friday indicates that Pakistan may default when its Sukuk matures in December this year. Yields on global bonds have stayed below 10% in normal circumstances.
According to an expert, Prime Minister Shehbaz Sharif’s visit to China early next month will determine the future course of the rupee.
A delegation of high government officials, which will accompany the PM during the trip to the world’s second-largest economy, will seek new loans and the rescheduling of existing ones to create room to cope with the flood devastation across the country.
Pakistani currency hit an all-time low at Rs239.94 against the greenback on July 28. Since then, it has continued to fluctuate but has never crossed the record low.