In line with expectations, the new IMF programme strongly defended the Pakistani currency and allowed a significant fightback against the US dollar after it surged by 3.62,%, or Rs10, to Rs276 against the US dollar in the interbank market Tuesday morning.

In the open market, the currency also jumped by Rs10 to reach Rs280 against the greenback this morning. This is significantly lower compared to Finance Minister Ishaq Dar’s claim of Rs270-272 against the dollar in the open market on Monday. Currency dealers said the retail market had largely remained closed the previous day.

Pakistan signed a staff-level agreement (SLA) with IMF for a new nine-month loan programme of $3 billion on Friday.

Tuesday was the first trading session in the interbank market after one week of Eid holidays, weekly and annual offs. It was the first session of the new fiscal year 2024 as well. Pakistan achieved the IMF lifeline over the holidays.

Read: IMF deal charts path to economic recovery

Experts said the first IMF tranche of $1-1.25 billion is expected in July and new loan inflows from other multilateral creditors and friendly countries of around $1.5-2 billion would soon help in rebuilding the country’s foreign exchange reserves and support the rupee against the greenback.

Although the reserves recovered to over $4 billion, they still remained critically low providing only one-month import cover.

Experts projected the currency may recover to Rs270 – 275 against the USD, but the massive recovery would be temporary, and last for a brief period of around two weeks.

Earlier, the currency had hit a historical drop of 28% (Rs81) to Rs286 against the dollar during the previous fiscal year which ended last Tuesday (June 27, 2023).

The slump in FY23 was mostly recorded on persistent delays on the revival of the IMF $7 billion programme which ended prematurely on June 30, 2023.

Before signing the new IMF deal, the government fixed the functioning of the domestic currency market to address IMF concerns.

The central bank reopened all imports last week to fulfill another condition for the program and adjusted the FY24 budget in line with the Fund recommendations.