The Pakistani rupee experienced a significant increase in value as optimism grew regarding the positive impact of the International Monetary Fund’s bailout on the demand for the country’s assets.
On Tuesday, the rupee strengthened by 4% against the dollar, reaching 274.5 per dollar, as reported by Arif Habib Ltd.’s foreign-exchange desk, following a four-day holiday. Additionally, Pakistan’s dollar bonds maturing in 2031 saw an 11-day consecutive climb, with the bonds trading at 48 cents on the dollar. The primary stock index remained relatively stable.
Concerns about a potential sovereign default diminished after Pakistan reached a last-minute preliminary agreement with the IMF for a $3 billion bailout the previous week. The market responded positively to the deal, with the largest gain in 15 years observed on Monday, while dollar bonds experienced a surge. Barclays Plc upgraded its rating on Pakistan’s dollar bonds to market weight.
Despite the positive impact of the IMF’s assistance on investor sentiment, there are concerns about the government’s ability to meet the loan’s conditions. Pakistan’s history with the IMF has been marked by volatility. In August, the government obtained staff approval for a $1.1 billion loan, only for the program to be halted due to Islamabad’s failure to fulfill certain conditions.
