Where There’s a Will, There’s a Way

Mon Nov 20 2023
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Shahzada Ahsan Ashraf

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“Don’t try to hit me and hit me.” Anyone who’s seen the movie Matrix will remember Morpheus’ line during Neo’s training. It underlines the disparity between “Wish” & “Intent”. While every government aspires to have a strong currency & low interest rates, this government is pursuing its intent to make it look real.


So while the odds are heavily against Rupee appreciation, that’s what is unfolding. This is exactly what Tresmark’s previous weekly forecasted that the Rupee would appreciate once IMF goes back post-approval.


As soon as the staff-level agreement was announced with the International Monetary Fund (IMF), key figures such as the Prime Minister, Finance Minister and Governor State Bank of Pakistan (SBP) came out with guns blazing and spoke all positives to reinforce the sentiment. The verbal intervention was complemented by market tactics to bring down USDPKR. Allegedly, import payments were postponed, new LC issuance was restricted and intensified oversight in market trading.

Rupee Outlook

This resulted in PKR reversing its 17-day losing streak and surging from 288 to 286.50 against the dollar. This reversal has reintroduced exporters to sell forwards, even though forward premiums were down by 30% (1 & 3 months ended the week at 190 & 430 paisa). The market now anticipates that the Rupee will strengthen to around 282/$, whereupon SBP will restart its dollar buying.


Positive development flows like lending from multi-laterals & IMF Board of Directors approvals will keep Rupee buoyant. Some of the positives announced are:

Highlights of announcements

– CAD for Oct projected to shrink to $100mn

– Forex reserves consolidation from $8.5 billion in February ’23 to the current $12.5 billion.

– Inflows from the World Bank(WB), Asian Development Bank (ADB), and Asian Infrastructure Investment Bank(AIIB) of approximately $1.2bn before year-end.

– Hopeful of more inflows from Saudi & UAE

– Uptick in RDA inflows

– Higher exports & remittances

– Further cut of 50 bps in TBills, as per the latest auction

– Inflation to sharply contract from January onwards due to tight monetary policy and base effect; interest rates are positive on forward-looking basis

– Easing of Brent Oil from $97 to $80 (17%) in the last 20 days

Global Risks are too gigantic

But it’s too early to claim success. The geopolitical risks in the region are substantial, the US fiscal crisis is a global threat, highly likely chances of recession in Europe, the UK, China and swathes of emerging markets where sovereign debt trades at distressed levels, the Russia-Ukraine conflict and China’s epic debt crises will keep markets on their toes.

Domestic Reforms still very slow

But the real disappointment is still the slow progress of reforms within the country including  low productivity, low tax to Gross Domestic Product (GDP), fiscal mismanagement, energy reforms, privatisation of loss-making SOEs, etc. No amount of verbal assurances and optics management will improve the country’s financial health. With less than 3 months until the next elections, we can hear investors say, “Welcome to the real world.” (Morpheus – Matrix)

Shahzada Ahsan Ashraf

The writer is a Former Chairman and CEO of PIA. Former Federal Minister for Industries and Production.

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