PKR to rebound around 244 per USD after October

May 19, 2023 (MLN): The Pakistani rupee (PKR) will likely rebound to 244 per US dollar after October 2023 if the political turbulence passes as elections would help restore order, according to the latest report by Bloomberg.

However, the currency will likely fall further if Chairman PTI Imran Khan and the government continue to clash and/or if the IMF chooses not to provide loans, the report warned. 

"Pakistan's rupee is undervalued by about 14%, according to our model," Ankur Shukla, South Asia Economist for Bloomberg Economics said on Friday.

He attributed the depreciation to the delays in aid from the International Monetary Fund and clashes between the government and opposition leader Imran Khan, who was jailed on corruption charges on May 9, 2023. 

According to the estimations put forth by Bloomberg Economics, the fair value of PKR is around 244. 

This fair value measures the change in the real effective exchange rate required to bring the current account deficit in line with long-term trends.

The rupee has traded in the range of 280 to 285 per dollar since March. It's at about 285 now, it added.

Capital is fleeing Pakistan because there is a growing risk that the IMF will not deliver a bailout, which is needed for the country to avoid default in the fiscal year starting from July. Aid has been stalled since November.

The country's leadership has been unstable since Khan was ousted as prime minister in a no-confidence vote in April 2022. Imran Khan's arrest this month (he was released after one day) has escalated the face-off between him and the government, as well as the army.

It is important to note that the rupee plunged to a record low of 299 per dollar after Khan's jailing, but recouped its losses and settled back at 285 after his release.

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