It is expected that Pakistan will further allow massive rupee depreciation against the US dollar in 2019. A research house of a brokerage firm confirmed that rupee will be devalued in line with the International Monetary Fund’s (IMF) loan programme implementation.
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Topline Research in its paper on “Pakistan’s Economy: IMF Programme and its Implications” revealed that the government is expected to let the rupee devalue 13 to 17 percent against the US dollar.
Thus by December 2019, the rupee might stand at somewhere around Rs 160 to Rs 165 against the US dollar. Also, the research claims that the key interest rate may also be increased by 1.25% points to reach a peak of 12% during 2019.
The State Bank of Pakistan earlier let the Pak rupee depreciated by 34% to reach Rs141.3 against the US dollar. Since December 2017 the interest rate was increased by 5% points to 100.75% points.
It is feared that these measures will lead to a slowdown in the economic activities affecting the auto sector, manufacturing sector, and the agricultural sector.
The research house said, “We may see major steps towards fiscal, monetary and structural reforms in the next few weeks either with or before the budget that is expected to be announced in the next few weeks.
These may include rupee depreciation/free float, a further hike in interest rate, increase in energy prices, elimination of subsidies, new and more taxes, aggressive privatization among others.”
Adding, “Once again the IMF will demand the rupee’s free-float and we expect the rupee to settle in the range of Rs160-165 by December 2019.”