Finance Minister Muhammad Aurangzeb said he does not see a need for significant devaluation of the Pakistani rupee as part of the negotiation for a new multi-billion-dollar programme with the International Monetary Fund (IMF).
In an interview with Bloomberg, Aurangzeb – on a trip to Washington to attend the spring meetings organised by the IMF and World Bank – said “there’d be no reason for the rupee to depreciate more than the range of about 6% to 8% seen in a typical year”.
While massive devaluations have accompanied some of Pakistan’s previous IMF loans and are often a condition of the crisis lender’s programmes around the world, nothing comparable should be necessary this time around, he was quoted as saying in the Bloomberg report.
The rupee has been largely stable for the past five to six months to hover in a rather narrow range.
“I don’t see the need for any step change,” Aurangzeb was quoted as saying in the report published on Wednesday.
The finance minister cited solid foreign exchange reserves, a stable currency, rising remittances and steady exports as the reasons behind the lack of need for a massive devaluation.
“The only thing which can be a wild card, although in our projections we should be okay, is the oil price,” he said.
Aurangzeb explains why Pakistan needs larger, longer IMF programme
Pakistan’s foreign exchange reserves position has somewhat stabilised in recent weeks, with the reserves held by the State Bank of Pakistan (SBP) slightly decreasing by $0.1 million on a weekly basis, clocking in at $8.04 billion as of April 5.
The reserves are set to fall with Pakistan making an international bond payment, but a fresh inflow from the IMF as part of the $3-billion Stand-By Arrangement (SBA) could bolster the position again.
Talking to Bloomberg, Aurangzeb said the new government was looking to bolster industries including agriculture and information technology with support that it hopes will help push the nation’s growth above 4% in the coming years.
As per the report, Pakistan, in its talks with the IMF, plans to seek a traditional loan through the lender’s extended fund facility.
Pakistan and IMF discussing new multi-billion-dollar programme, finance minister says
It also wants to get money via the IMF’s new Resilience and Sustainability Trust, which intends to strengthen low-income and vulnerable countries against external shocks like the floods that devastated Pakistan in 2022, added the report.
Apart from inking a new IMF programme, Pakistan must pay off about $24 billion to its external lenders in the coming fiscal year. However, Aurangzeb said Pakistan is in “relatively good shape” to make those payments.
IMF chief says Pakistan seeking potential follow-up loan program
Pakistan needs to repay “a couple of billion dollars” in the present fiscal year but reserves are expected to reach around $10 billion by the end of June from $8 billion now, Aurangzeb told Bloomberg.
During the interview, Aurangzeb informed that Pakistan expects an IMF mission to visit in May and reach a staff-level agreement on its next loan by the end of June or early July.
The finance minister, however, did not specify the amount of funds it seeks.
Last year in summer, Pakistan inked a last-minute $3-billion SBA, which will expire this month.