KARACHI: The rupee opened slightly stronger on Monday as market participants awaited the announcement of a new finance minister, at a time when the country grapples with economic turmoil worsened by devastating floods.
The rupee opened at 239.65 to a dollar and gained around 1 percent in the opening session, the forex exchange association said.
Finance Minister Miftah Ismail said on Sunday he planned to formally resign from the role. He is likely to be replaced by a senator from Pakistan Muslim League-Nawaz (PML-N) party, Ishaq Dar, who according to analysts is known for keeping the rupee over-valued against the dollar.
Dar has previously served as the finance minister more than once during the three tenures of PML-N since 1990.
“The Dar factor is at play. There are memories of how he kept the dollar rate stable,” Fahad Rauf at Ismail Iqbal Securities told Reuters.
The dollar is strengthening against most global currencies, and Pakistan, hit hard by cataclysmic floods, is in a tight spot with less foreign reserves, he said.
“There is no way (the rupee) can sustainably move against the tide in the current scenario,” Rauf said.
NEAR DEFAULT
The ruling party has repeatedly claimed it inherited one of the worst economies from former prime minister Imran Khan, who was ousted in a contentious vote of no-confidence in April. Khan denies he passed on a broken economy.
As the new government took over, a rescue programme with the International Monetary Fund (IMF) was in the doldrums because of a lack of agreed policy framework.
Ismail said he pulled the country out of a near default situation, but markets have not responded positively, with the rupee tumbling to a record low and inflation crossing over 27 percent.
The unpopular decisions Ismail took to adhere to the IMF preconditions, like rolling back power and fuel subsidies given by Khan in his last weeks in power, caused high inflation and the rupee devaluation.
It raised questions within PML-N that the all-time high inflation was denting its vote constituency as Khan has received unexpectedly large public support ahead of general elections late next year, said officials with the ruling Pakistan Democratic Movement (PDM) coalition.
With the economy in a tailspin with one of its worst balance of payment crises, devastating floods hit the nation that are estimated to have cost it nearly $30 billion, and forcing the government to cut its GDP growth forecast below 3 percent from a 5 percent budgetary target for 2022-23.
