The rupee made a slight recovery against the dollar in interbank trade on Thursday as the government reached a staff-level agreement with the International Monetary Fund (IMF) for the revival of the stalled loan programme.

According to the Forex Association of Pakistan (FAP), the greenback was trading at Rs208.5 in the interbank market at 11:40am, down from the previous day's close of Rs210.1.

However, it closed at at Rs209.8 with the local currency reversing most of its earlier gains. Overall, the rupee appreciated 0.14 per cent.

Earlier today, FAP Chairman Malik Bostan had attributed the rupee's initial gains to the expansion of the loan programme by the Fund. "We are hoping to see a further decline in the greenback, somewhere below Rs200," he told Dawn.com.

Bostan also said that the decrease in the price of crude oil would help lower the country's import bill, ultimately leading to a reduction in inflation. "All this will relieve the pressure on the economy," he pointed out, adding that the country had managed to "come out of danger".

Meanwhile, analyst Komal Mansoor said that the market expected the greenback to fall to Rs205 or below.

"The change will be gradual. Right now, only a staff-level agreement has been reached. I feel the market will move when an executive-level agreement is reached," she said.

The director of Mettis Global, a web-based financial data and analytics portal, Saad Bin Naseer, however, was quick to add that the "correction was relatively small" owing to the dollar's "strengthening trend".

"The US dollar hit a two-decade high this week against a basket of currencies ahead of aggressive rate hike expectations from the Federal Reserve in view of higher inflation readings," Naseer said.

IMF agreement

Earlier today, the IMF confirmed that it had reached a staff-level agreement with Pakistan. The deal materialised after the government met the IMF’s demand that the country achieves a primary budget surplus of Rs152 billion to revive the bailout package.

In a statement on its website, the Fund said the agreement was subject to approval by its Executive Board.

“The IMF team has reached a staff-level agreement (SLA) with the Pakistan authorities for the conclusion of the combined seventh and eight reviews of the extended funded facility (EFF) supported programme. The agreement is subject to approval by the IMF’s Executive Board,” the IMF statement read.

It added: “Subject to Board approval, about $1,177 million (SDR 894m) will become available, bringing total disbursements under the programme to about $4.2bn.”

The international money lender said a team led by IMF Mission Chief to Pakistan Nathan Porter finalised the discussions with Pakistan and that it had also agreed to consider extending its EFF, currently worth $6bn, till the end of June 2023, as well as augmenting it by $720m to expand its size to $7bn.

The statement said this decision was taken to support the programme’s implementation, meet Pakistan’s higher financing needs in FY23 and catalyse additional financing.