Syed Raza Hassan
KARACHI, Pakistan (Reuters) – The Pakistani rupee opened slightly stronger on Monday, as market participants awaited the announcement of a new finance minister at a time when the country countries grapple with economic turmoil exacerbated by devastating floods.
Rupee opened at 239. 65 rose about 1 percent against the dollar, the Foreign Exchange Traders Association said at the opening ceremony.
Finance Minister Mifta Ismail said on Sunday that he plans to formally resign from the post. He is likely to be replaced by his party’s Senator Ishak Dal, who is known for keeping the rupee overvalued or stable against the dollar, according to analysts.
They are all from the ruling party, Prime Minister Sheikh Baz Sharif’s government is made up of multiple political parties.
Dar was Finance Minister more than once during Sharif’s Pakistan Muslim League-Nawaz (PML-N) rule.
“Dar factor at work … people remember how he kept the dollar stable,” Fahad Rauf of Ismail Iqbal Securities told Reuters.
The U.S. dollar is strengthening against most global currencies, while Pakistan, battered by catastrophic floods, is struggling with dwindling foreign exchange reserves, he said.
“(Rupee) cannot sustainably swim upstream in the current situation,” Rauf said.
Close to default
The ruling party has repeatedly said it inherited one of the worst economies in the past from the April no-confidence vote by former Prime Minister Imran Khan was ousted from office. Khan denies he passed on a broken economy.
With a new government in place, the International Monetary Fund’s (IMF) bailout has languished due to the lack of an agreed policy framework.
Ismail said he pulled the country out of near default, but markets did not react positively, rupee fell to record low, inflation exceeded 27%.
Unpopular decisions by Ismail to comply with IMF preconditions, such as the removal of electricity and fuel subsidies given by Khan in the final weeks of his rule, led to High inflation and depreciation of the rupee.
This has raised questions within Ismail’s party that record inflation is crippling votes in his constituency as Khan moves ahead of the next general election Officials with the ruling coalition, which has received an unexpectedly large amount of public support, said.
Devastating floods hit the country with an estimated loss of nearly $30 billion and forced the government to cut its GDP growth forecast to below 3% from the 2022-23 5% budget target.