The Pakistani rupee will undergo a stability test in the upcoming weeks as the nation deals with the aftermath of the February 8 general elections and a subsequent political crisis.
In last week’s interbank market, the rupee remained stable, closing at 279.36 against the dollar on Monday, a slight change from Friday’s 279.33.
Following the contested February 8 elections, which led to claims of vote manipulation and demonstrations by the PTI party, Pakistan faces a severe political dilemma. Leading in the polls, the PTI has demanded re-election, citing electoral fraud favouring the PML-N.
Moody’s issued a warning, marking the political turmoil and social unrest as “credit negative” for Pakistan, according to a Tresmark client note.
Read: Pakistani Rupee Slightly Strengthens Post-General Elections
The country’s perceived authoritarianism complicates negotiations with the IMF, which insists on dealing with an elected government, Tresmark noted, predicting significant economic repercussions.
Despite political uncertainties, experts hesitate to forecast financial market trends, anticipating the rupee’s stability in the next two weeks, supported by Ramadan remittances, Tresmark highlighted.
Ramadan’s onset in mid-March, leading to increased remittances by April, contrasts with a 3% decrease in remittances from July to January FY24, totalling $15.832 billion.
Read More: IMF Review Mission to Visit Pakistan Post-Government Formation
The potential new government is expected to maintain the rupee’s current “stable” status, with significant IMF negotiation effects and financial inflows anticipated post-March, including a critical $1 billion repayment.
Recent interbank forex market activity has been minimal, with financial institutions avoiding new or long-term commitments, suggesting a market stalemate until March amid warnings of intensifying political strife, Tresmark concluded.
