• Saturday, July 20, 2019

Rupee to depreciate Rs160-165 against US dollar by Dec 2019

Discussion in 'Pakistan Economy' started by Hiraa, May 9, 2019.

  1. Hiraa

    Hiraa FULL MEMBER

    Messages:
    722
    Joined:
    Oct 19, 2016
    Ratings:
    +0 / 1,216 / -0
    Country:
    Pakistan
    Location:
    Pakistan
    KARACHI: Pakistan is bracing for an economic jolt as the government is expected to allow a significant rupee depreciation and key interest rate hike in 2019. These steps will be taken to implement the International Monetary Fund’s (IMF) loan programme, a research house of a brokerage firm said on Wednesday.

    In a paper on “Pakistan’s Economy: IMF Programme and its Implications”, Topline Research said the government was expected to let the rupee depreciate 13-17% to Rs160-165 against the US dollar by December 2019 and the key interest rate may be raised by 1.25 percentage points to the peak of 12% during the year.

    Earlier, the central bank had let the currency depreciate by 34% to Rs141.3 to the greenback and increased the interest rate by five percentage points to 10.75% since December 2017.


    The measures are feared to slow down economic activities as reflected in contraction of the large-scale manufacturing sector and lower agricultural production, where additional impact came from poor water management.

    Rupee strengthens against dollar

    Previously, the State Bank of Pakistan (SBP) and several international and local institutions estimated Pakistan’s gross domestic product (GDP) growth in the range of 2.5-3.5% in FY19 compared to a decade high growth of 5.2% in FY18.

    The implementation of IMF programme may further worsen economic activities from the earlier forecast. “We may see major steps towards fiscal, monetary and structural reforms in the next few weeks either with or before the budget that is expected to be announced in the next few weeks. These may include rupee depreciation/free float, further hike in interest rate, increase in energy prices, elimination of subsidies, new and more taxes, aggressive privatisation among others,” the research house stated.

    “Once again the IMF will demand the rupee’s free-float and we expect the rupee to settle in the range of Rs160-165 by December 2019,” it said.

    Ten-month tax revenues show a shortfall of around Rs345 billion (0.9% of GDP) while the “budget deficit is expected to exceed 7% of GDP in FY19 after a gap of five years”, it added. Given the increased taxation measures to shore up revenues, reduction in subsidies and rupee depreciation, “we expect inflation to average in low double digits in FY20; we expect the central bank’s policy rate to peak at 12% during 2019”, according to the research house.

    PSX outlook remains gloomy ahead of tough IMF programme

    The IMF programme is expected to include key technical benchmarks including Net Domestic Assets (NDA) and Net International Reserves (NIR) targets, which will reduce borrowing from the central bank and increase forex reserves, respectively.

    The government will have to pay more attention to privatising and restructuring loss-making state-owned enterprises. Moreover, the energy-sector reform and resolution of the outstanding circular debt will also likely be part of the IMF programme.

    IMF expected to lend $10b

    “Although the previous finance minister expected a $6-8 billion IMF package, we think the size of the programme should be bigger (over $10 billion), considering the upcoming debt repayments,” the research house stated.

    With IMF’s support, other lending agencies will also feel comfortable in providing funding to Pakistan. There are news reports that the World Bank and the Asian Development Bank (ADB) will extend their support to Pakistan to the tune of $6-8 billion once Pakistan enters the IMF programme.

    Pakistan got a sigh of relief after around $8.5 billion came from Saudi Arabia, the United Arab Emirates (UAE) and China. Due to these, Pakistan’s foreign exchange reserves rose from a low of $7.2 billion in December 2018 to $10.2 billion last month (April 5, 2019).

    However, these have been on the decline for the last four weeks and are now down to $8.8 billion (less than two months of import cover). Foreign exchange reserves net of swaps are at low levels at $1-1.5 billion, considering $1 billion a month in upcoming debt repayment.

    IMF programme by June

    “Given the current discussions with the IMF team and recent changes in key government positions, we are of the view that Pakistan will likely enter the IMF programme by June,” it said.

    Topline Research said it expected the IMF programme to be approved this month or next month. It estimated the bailout package to be an Extended Fund Facility (EFF) for a period of three years.

    Stocks to rally post-IMF programme

    Pakistan has a long history of signing IMF programmes. Following the last three IMF programmes, the benchmark KSE-100 index rallied on an average 37% in the 12 months post-IMF deal.

    “We attribute the improvement in market sentiment during the IMF programme to an improved external account situation on receipt of foreign flows and stabilisation on the macroeconomic front,” it said.

    “Now, based on the assumption that Pakistan will get a new IMF loan soon, we are maintaining our index target range of 40,000-45,000, providing total return of 12-26% from here.” As expected, the newly appointed adviser to the prime minister on finance is forming his own team. Over the last few days, the government has appointed a new central bank governor, Reza Baqir, who has worked with the IMF for the last 18 years and was last heading the IMF mission in Egypt.

    Baqir has overseen implementation of the current IMF programme in Egypt, which was approved in November 2016 and will end later in 2019. “The Egyptian programme has two key contours – free float of currency and reduction in energy subsidy,” it said.

    The government has also recently appointed Shabbar Zaidi, a seasoned tax consultant and former partner of AF Ferguson and Co, as head of other key institution, the Federal Board of Revenue (FBR). “These two changes, we believe, are a desperate move to get the IMF package and implement tough economic reforms,” the research house added.

    Published in The Express Tribune, May 9th, 2019.

    Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation

    https://tribune.com.pk/story/1968786/2-rupee-fall-interest-rate-hike-expected/
     
    • Thanks Thanks x 2
  2. MUSTAKSHAF

    MUSTAKSHAF SENIOR MEMBER

    Messages:
    6,983
    Joined:
    Nov 19, 2014
    Ratings:
    +22 / 8,644 / -8
    Country:
    Pakistan
    Location:
    Pakistan
    Senu kee Dollar hai nahi tai Ropiya jaib ich tik da nahi,sadi tarfu 1 hazar da aik dollor karoo:lol:
     
    • Thanks Thanks x 1
  3. AZADPAKISTAN2009

    AZADPAKISTAN2009 ELITE MEMBER

    Messages:
    28,867
    Joined:
    Sep 8, 2009
    Ratings:
    +39 / 27,923 / -2
    Country:
    Pakistan
    Location:
    China
    Fake news

    The state bank guy was changed to prevent that from happening

    Government controls devaluation thru state bank
     
  4. Retired Troll

    Retired Troll ELITE MEMBER

    Messages:
    37,899
    Joined:
    Apr 5, 2017
    Ratings:
    +14 / 33,028 / -11
    Country:
    Pakistan
    Location:
    Germany
    200
     
    • Thanks Thanks x 1
  5. maithil

    maithil BANNED

    Messages:
    1,588
    Joined:
    May 21, 2010
    Ratings:
    +0 / 840 / -16
    Good for exports (as per some tomato growing economists ).
     
  6. rak_987

    rak_987 FULL MEMBER

    Messages:
    133
    Joined:
    Nov 30, 2018
    Ratings:
    +0 / 157 / -0
    Country:
    Pakistan
    Location:
    Pakistan
    Tussle going on between babus and newly appointed IMF imposed chiefs.

    Imran Khan making Ishaq Dar look sincere and smart in dealing with these lending institutions.

    PAkistan needs to privatize and sell PIA and other garbage instead of transfering more burden on salaried class who primarily voted for him. Imran is being pushed into a trap by IMF. IMF since 1994 has been doing this to Phillipines and PAkistan to devastate economies and increase corruption.

    Need to stop negotiating with IMF, has done a pi** poor job anyways.
     
    • Thanks Thanks x 2
  7. VCheng

    VCheng ELITE MEMBER

    Messages:
    37,520
    Joined:
    Sep 29, 2010
    Ratings:
    +55 / 31,684 / -4
    Country:
    Pakistan
    Location:
    United States
    As my friend said, menu kee, pehlay vee punjsau da petrol pawai da see, hun vee punjsau da pawana han.
     
    • Thanks Thanks x 1
  8. Enigma SIG

    Enigma SIG FULL MEMBER

    Messages:
    1,277
    Joined:
    Feb 20, 2009
    Ratings:
    +0 / 1,049 / -0
    Country:
    Pakistan
    Location:
    Pakistan
    It's the countries the IMF loans to that do a piss poor job of financial discipline and money management. When the government is willing to give free handouts, subsidies, operating loss making enterprises, pension schemes and so much more financial irregularity; the country is bound to be on the edge of default every single time.
     
    • Thanks Thanks x 2
  9. VCheng

    VCheng ELITE MEMBER

    Messages:
    37,520
    Joined:
    Sep 29, 2010
    Ratings:
    +55 / 31,684 / -4
    Country:
    Pakistan
    Location:
    United States
    Not yet, but in a few years, towards the end of this present term.
     
  10. Retired Troll

    Retired Troll ELITE MEMBER

    Messages:
    37,899
    Joined:
    Apr 5, 2017
    Ratings:
    +14 / 33,028 / -11
    Country:
    Pakistan
    Location:
    Germany
    Not really. I say before 2019 is over Dollar would be around 200 given the current trend.

    Ofcourse those in the government would know better since they are the ones getting richer in all of this.
     
    • Thanks Thanks x 2
  11. Fledgingwings

    Fledgingwings SENIOR MEMBER

    Messages:
    3,081
    Joined:
    Mar 11, 2017
    Ratings:
    +0 / 1,131 / -0
    Country:
    Pakistan
    Location:
    Pakistan
    Not Good.
     
    • Thanks Thanks x 1
  12. RoadRunner401

    RoadRunner401 SENIOR MEMBER

    Messages:
    2,567
    Joined:
    May 28, 2015
    Ratings:
    +0 / 2,516 / -0
    Country:
    Pakistan
    Location:
    Canada
    These prediction based on research done by qualified individual at his research facility of local pawn shop while smoking Hukha.
     
    • Thanks Thanks x 1
  13. ARMalik

    ARMalik FULL MEMBER

    Messages:
    1,393
    Joined:
    Dec 7, 2017
    Ratings:
    +3 / 2,156 / -0
    Country:
    Australia
    Location:
    Australia
    As I mentioned previously that one clear indication that the country is run by foreign posted hounds is the "depreciation" of rupee, and that this new appointed Governor of State Bank Reza is an economic hitman. He will absolutely destroy the rupee. By the time he is finished, the Rupee will be 250 vs 1-dollar. It is absolutely pathetic and shameful that the so called "Deep State" is fully involved in destroying the livelihoods of ordinary Pakistan people.
     
    • Thanks Thanks x 2
  14. VCheng

    VCheng ELITE MEMBER

    Messages:
    37,520
    Joined:
    Sep 29, 2010
    Ratings:
    +55 / 31,684 / -4
    Country:
    Pakistan
    Location:
    United States
    Please keep in mind that the basic value of the PKR depends on what Pakistan produces compared to what it consumes, and not by any foreign "hounds".
     
    • Thanks Thanks x 2
  15. waqasmwi

    waqasmwi FULL MEMBER

    Messages:
    183
    Joined:
    Mar 16, 2019
    Ratings:
    +0 / 147 / -0
    Country:
    Pakistan
    Location:
    Pakistan
    If It's the fake news tgan what's the truth?? Dollar at Rs 100 again or remains at 140?