Dollar’s rise weakens govt hand in talks with IMF

The increasing difference between the interbank and open market rates of the dollar has thrown up a challenge for the government as the Standby Arrangement (SBA) with the International Monetary Fund requires it to keep the differential down to 1.25 per cent. The differential has now soared to 5.6pc. A key condition of the $3bn SBA, signed last month, relates to the market-determined exchange rate. “Steadfast policy implementation is vital for Pakistan to overcome its current challenges through greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms,” said the IMF. Unrelenting rise The dollar has trampled upon all barriers since the IMF deal, shooting up to Rs302 in the interbank market on Monday. The open market unofficial rate, which is close to the real rate, was Rs319 — a difference of 5.6pc. The rupee has been steadily weakening after the IMF deal, registering a depreciation of Rs26.5 in six weeks. It has lost Rs13.51 since the caretakers took over earlier this month. “The IMF is expected to review the SBA in November. There are still two months to go, but there is little likelihood that the State Bank would be able to bring down the differential to 1.25pc,” said Atif Ahmed, a currency dealer in the interbank market.