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Pakistani Rupee Expected to Depreciate Despite Government’s Efforts to Secure IMF Bailout

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According to economic experts, the Pakistani rupee, which is currently exchanged at Rs278 against the dollar, is projected to depreciate to Rs295 by the end of December 2024. This prediction, despite the government’s hopes of securing a new bailout package from the International Monetary Fund (IMF), underscores the urgent need for action.

The report cites Tresmark’s client note, indicating that economic challenges, including elevated inflation and demand contraction, will persist soon. Minister of State for Finance Ali Pervaiz Malik expressed the government’s aim to secure an IMF bailout exceeding $6 billion after addressing all the lender’s requirements in its tax-heavy budget. The budget included increased taxes, explicitly targeting the salaried class, exporters, petroleum products, and the real estate sector to boost revenue generation and stabilize the country’s economic indicators.

The local currency’s performance has seen fluctuations, with the rupee projected to trade at Rs295 against the dollar by the end of 2024 and Rs325 by June 2025. Positive indicators such as a narrowing trade deficit and a resilient stock market hint at a gradual economic recovery. However, the report cautions that potential implications from the Finance Bill’s tax measures, which include tax measures and escalating fuel prices, may further strain purchasing power and demand.

Regarding the policy rate, it is anticipated to remain between 17 to 19% by December 2024 to counter growth-related inflationary pressures. Economist Sakib Sherani has stressed the critical need for a quick IMF deal to alleviate pressure on the country’s foreign exchange reserves and currency due to maturing debt repayments and the effects of unwinding previous capital and import controls.

In conclusion, while the government aims to secure an IMF bailout to stabilize the economy, the projected depreciation of the Pakistani rupee and concerns over inflationary pressures and purchasing power underscore the significant challenges ahead for Pakistan’s economic outlook.

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