Pakistan rupee hits all-time low days after IMF bailout deal

Money dealers counts Pakistani rupees (R) and US dollars at a currency exchange in Islamabad
Updated 15 May 2019

Pakistan rupee hits all-time low days after IMF bailout deal

  • Currency falls to record 146.25 against the US dollar
  • PM reportedly said the fund has not demanded further devaluation

KARACHI: The Pakistani currency on Wednesday hit an all-time low of 146.25 rupees against the US dollar amid looming fears of further devaluation, just days after Pakistan signed a bailout deal with the International Monetary Fund.
The $6 billion bailout package comes with strict reform conditions, including measures to maintain a free-floating exchange rate.
After reaching the record low, the rupee closed at 144 against the dollar at the end of the trading day.
Malik Bostan, president of the Forex Association of Pakistan, said he met with Prime Minister Imran Khan on Wednesday, who assured him that the IMF had not demanded further devaluation of the rupee.
“The IMF has only demanded an exchange rate based on demand and supply,” Bostan told Arab News. 
“After the meeting with PM, dollar rates have started cooling down and will further stabilize. We have requested the government to impose a ban on rumors regarding the rupee that are hurting market sentiments. Predictions about the dollar (in) the media should be stopped.”
Bostan said that Khan had consented to setting up a committee comprising officials from the State Bank of Pakistan, exchange companies and the Finance Ministry to resolve the issues faced by exchange companies.
“We have informed him we can increase inflow of greenback from $5-6 billion to $7-8 billion provided agreements are facilitated with around 500 international companies operating in Pakistan,” Bostan said, adding that the PM had agreed to devise a mechanism to discourage the outflow of dollars from Pakistan by encouraging investment in the country.
The International Monetary Fund and Pakistan reached a “staff level agreement” on Sunday for a $6 billion bailout package following months of negotiations on a deal that aims to bolster Pakistan’s flagging economy and perilously low foreign exchange reserves.
Talks with the IMF began soon after Khan’s government was appointed last August but a package has been held up by differences over the pace and scale of reforms that Pakistan would be required to undertake.
The IMF has pressed Pakistan to improve tax revenue collection, bolster foreign currency reserves and narrow a current account deficit expected to top 5 percent of gross domestic product this year. The Fund has also pushed Pakistan to embrace a flexible rupee policy. Pakistani officials fear these steps will further hurt economic growth, cause of spike in the key interest rate and push the Pakistani rupee further down.
“A market-determined exchange rate will help the functioning of the financial sector and contribute to a better resource allocation in the economy,” the IMF said in a statement issued after the agreement.
“The rumors of further devaluation of (the) rupee against dollar have squeezed the supply of the dollar and increased demand,” said Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan. “Those holding dollars are not willing to sell, anticipating gains on devaluation.”


Etihad and Air Arabia start Abu Dhabi-based budget carrier

Updated 44 min 51 sec ago

Etihad and Air Arabia start Abu Dhabi-based budget carrier

  • The new Air Arabia Abu Dhabi will be launched in due course: Etihad CEO
  • Etihad invested heavily in carriers around the world

LONDON: Etihad Airways is setting up a low-cost carrier with Air Arabia in what is a major change of direction for the Abu Dhabi-based airline.
It represents Etihad’s first tie-up with another airline since its ill-fated equity alliance strategy which saw it take stakes in a number of struggling European carriers, some of which went bust, including Air Berlin.
Air Arabia Abu Dhabi will operate from Abu Dhabi International Airport and will target rising demand from the budget segment, the pair said in a statement on Wednesday.
Etihad Group CEO Tony Douglas said: “This exciting partnership supports our transformation program and will offer our guests a new option for low-cost travel to and from Abu Dhabi, supplementing our own services.”
Abu Dhabi-based Etihad and Dubai-based Emirates invested heavily in their premium-cabin offering during the UAE’s boom years, tapping into strong regional demand for business and first-class travel. However, the sharp fall in oil prices since 2014 and a regional economic slowdown has hit premium travel hard and forced both carriers to cut costs and lay off staff.
Etihad’s move into the low-cost segment mirrors a similar partnership between Emirates and flydubai, the low- cost carrier started in 2008.
Etihad and Air Arabia did not say when flights would start or which routes would be served, but that further details “would be communicated in the near future.”
While premium travel continues to face headwinds in the Gulf, demand remains strong in the budget segment. Low-cost carriers accounted for a 17 percent share of seat capacity to and from the Middle East in 2018, compared to only 8 percent in 2009. 
Etihad Airways currently flies to about 80 destinations with a fleet of 108 Airbus and Boeing aircraft that carried 17.8 million passengers in 2018. Air Arabia, which is listed on the Dubai Financial Market, operates 54 Airbus A320 and A321 aircraft and serves 170 routes.