Pak to allow rupee depreciation after IMF talks

Islamabad, Dec 9: Pakistan has decided to allow rupee depreciation after crucial talks with the International Monetary Fund (IMF), a media report said today. 

The Pakistan government and an IMF delegation yesterday concluded the first round of discussions on the country's economy and the sides are on a two-day break to prepare for the policy-level wrap-up by December 13-14. 

A senior official told the Dawn that the State Bank of Pakistan (SBP) would now let the currency exchange rate adjust to market conditions after years of resisting expectations. 

The timing of the move was planned to ensure materialisation of USD 2.5 billion worth of receipts from two international bonds launched last month.

This calculated move allowed the currency rate to touch Rs 110 to a dollar yesterday before settling down at around Rs 107 and did not go beyond official estimates. 

The two weekend holidays would give breathing space instead of over-steaming the exchange rate. 

Sources said the IMF had concerns over the health of Pakistan's external sector, but government authorities had a different opinion.

As the two sides concluded technical talks, the IMF team will prepare a report of its assessment over the weekend and share it with Pakistani officials on Monday for the feedback and discussions.

While the government team, led by Secretary of Finance Shahid Mehmood will review the assessment, the IMF mission to Pakistan, led by Harald Finger, will visit Lahore next week for talks with provincial authorities including Punjab Chief Minister Shahbaz Sharif and independent observers and
researchers from the business community and representatives of a private-sector university.

The authorities believe the currency adjustment would help shift foreign currency holdings from commercial banks currently standing at a higher level of around USD 6 billion back to official reserves and help divert remittances to official channels with declining gap among the official, banking and open market rates.