Pakistan is unlikely to devalue its currency again as pressure on the rupee has eased, says Fitch Ratings, an international credit agency, Bloomberg reported.

“We currently do not expect a large further devaluation of the Pakistan rupee,” Krisjanis Krustins, a Hong Kong-based director at Fitch, said in an emailed response to the Bloomberg news agency earlier this week.

“The currency has been very stable over the past few months, (and) pressure on the reserves of the State Bank of Pakistan has also been contained, which suggests minimal interventions to support the currency,” he added.

Pakistan is negotiating to restart a $6.7bn bailout with the International Monetary Fund (IMF) and is trying to meet the conditions set by the lender.

The IMF said that it’s working with Pakistani authorities to fix its currency market and other issues before it resumes the bailout package.

The package, which expires in June, has been delayed since November. Pakistan is yet to receive $2.5bn from the $6.5bn programme.

The rupee has slumped more than 20pc this year after officials devalued the currency in January, making it one of the worst performers globally.

Islamabad points out that its dollar reserves have remained stable at about $4 billion since late February, after falling more than 50pc in the past 12 months.

Fitch, which is one of the big three credit rating agencies along with Moody’s and Standard & Poor’s, predicted last month that the Pakistan economy would face “sharper contraction’ in 2022-23 before a slight rebound.

The forecast said that Pakistan’s real GDP would contract by 0.8pc in FY23 (from -0.3% previously), before expanding by 2.5pc in FY24.

In February, Fitch assigned Pakistan a score equivalent to a rating of ‘CCC+’ on the long-term foreign-currency IDR scale.

In a comment on the 2023-24 budget, a former chairman of the Federal Board of Revenue (FBR), Shabbar Zaidi, pointed out that the rupee-USD parity has deteriorated by over 50pc in the last 12 months.

And, according to him, this parity is working against the rupee on the basis of realistic projections which take into account future cash flows.

Mr Zaidi argues that in the immediate future (2023 to 2026) there is no expectation of any substantial increase in exports from the country for genuine reasons. These will not cross $45bn by that time even under a very optimistic estimate. The same is the case with remittances from workers.

“Thus, if we do not keep, an informal ban on imports, the current account deficit per year is not expected to be less than $10bn,” he argues. “This is also required to be financed with addition to borrowings” and “these facts reveal that there will be a net shortfall of dollars in the forthcoming period.”

It was widely reported in the media that Pakistan signed a $6bn extended fund facility with IMF in 2019 and another $1bn was added in 2022 taking the total bailout package to $7bn.

Published in Dawn, June 11th, 2023