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The Pakistani rupee retraced its lowest value against the US dollar, crossing the 140-mark for the first time late on Monday. The latest plunge in the currency’s value comes ahead of a visit by an International Monetary Fund (IMF) mission chief, as Islamabad nears a deal on a bailout.

At a press conference on Monday Finance Minister Asad Umar confirmed that Pakistan is close to agreeing to terms with the IMF for what would be its 13th bailout package. Negotiations between the IMF and Islamabad have been going on since the Pakistan Tehrik-e-Insaf (PTI) government took charge in August last year.

“Pakistan’s stance has remained the same [throughout these months]. It’s the IMF that has revised its stance and gradually come closer to [Pakistan’s position],” Umar said while talking to the media.

However, sources within the Finance Ministry confirm that currency devaluation, which has seen the rupee plunge to a new low this month, was one of the preconditions of the IMF.

“The IMF has sought reassurances that the bailout package won’t be used to artificially bolster the rupee’s value. We’ve told them that this was a practice by the previous government and we will not replicate it,” a government official told Asia Times.

The rupee’s fall began in December 2017 under then Finance Minister Ishaq Dar, who wanted to keep the rupee’s value around the 100-mark with respect to the dollar. Under Dar, the State Bank of Pakistan pumped reserves to keep the currency afloat.

Former government’s policy

Experts criticized the Pakistan Muslim League-Nawaz (PML-N) government’s policy to maintain the rupee at an artificial value – and also questioned Pakistan’s dependency on the US currency.

Critics of the current government headed by Imran Khan argue that it has taken too long to agree to terms with the IMF.

“Nobody is as helpful as the IMF, there’s nobody else comes with the kind of commitment – if you don’t like it, don’t go to it. The world is laughing at the fact that the IMF and Pakistan have not been able to finalize anything. It has become a joke,” the PML-N government’s former finance minister Rana Afzal Khan claimed.

Finance Minister Asad Umar maintains that the delay stems from the IMF taking its time to agree on terms laid out by Pakistan, but government officials have said that Islamabad had been hoping to avoid an IMF bailout altogether.

Size of deal yet to be revealed

Officials also confirm that the Finance Ministry has been waiting for loans from countries like Saudi Arabia, the UAE and China. The UAE lent Pakistan $6.2 billion in January, while Saudi Arabia agreed on a package worth $6 billion in November. And Pakistan is set to receive another $2.1 billion from China this week.

Rana Afzal Khan believes the current government has finally decided to go to the IMF because of factors linked to the budget for the next fiscal year.

“Since the time to announce the budget is coming closer, the finance ministry is also pressed to announce something that they can present in the budget,” he said. “[But] the IMF deal will be based on the ratings that agencies have given Pakistan, and on the government’s ability to repay old debts. They will also look into projections for the development agenda.”

Rana Afzal Khan believes that the IMF package could be worth up to $8 billion. “I certainly think that the package will be more than $6.5 billion, and could be as much as $8 billion,” he said. Meanwhile, those in the Finance Ministry are hoping they will get a $12-billion deal.

Last week, Finance Minister Asad Umar revealed that Pakistan’s current account deficit for February this year saw a 72% decline compared to February 2018. The current account deficit dropped to $8.4 billion in the July-January period of the ongoing fiscal year, which was a 16.8% decrease.

The central bank’s foreign exchange reserves, however, decreased by $163 million last month to $8.043 billion. Following culmination of the previous IMF bailout, Pakistan’s reserves stood at $23 billion.

While the PML-N leadership remains critical of their successors’ indecisiveness, former federal finance secretary Waqar Masood Khan believes much of the blame for the economic turmoil should go to previous governments.

“We successfully completed an IMF program as recently as 2013-2016. And as soon as it was over, we undid all its positive impacts, which began to reflect in the currency exchange rate and budget deficit. The budget and foreign exchange – along with other economic variables – have been irresponsibly handled [by the previous governments],” he said.

“While the IMF program will help undo the mistakes of the past, it will come at a price that needs to be paid. This will be visible in the prices of fuel, gas and petroleum products. But after the initial pain, once the reserves increase, global trust will return, there will be more investments – which will be market-based.”

Waqar Masood Khan expects the rupee’s value to take further hits this year.

“The IMF has asked Pakistan to not touch the currency [rate]. The pressure will remain on the rupee because of the corrections,” he said.

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