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‘IMF giving Pakistan tough time’: Dollar soars to historic high of Rs279 after PM’s comments

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The rupee on Friday plunged to a historic low against the dollar after Prime Minister Shehbaz Sharif’s said that the International Monetary Fund (IMF) is giving Pakistan “a tough time” — as the lender wants the government to do more on the economic front.

“As we speak, an IMF delegation is in Islamabad [holding parleys on loan programme] and giving a very tough time to the finance minister and his team,” the prime minister said while speaking at the Apex committee meeting in Peshawar, and termed the economic challenges “unimaginable”.

Following the PM’s comments, the local currency depreciated further against the greenback in the interbank market.

During intra-day trade, the rupee was changing hands at 279 against the dollar at 12:48pm, according to the Exchange Companies Association of Pakistan (ECAP), up from Rs271.35 a day earlier.

Analysts have stressed that the country needs the Washington-based lender’s bailout programme to avoid default — a threat that has been looming over Islamabad for some months now.

AA Commodities Director Adnan Agar told Geo.tv that the rupee’s downward spiral is expected till Pakistan secures a staff-level agreement with the Washington-based lender.

The analyst said that the market is reacting to the reports coming on the demands being put forward by the IMF to the government.

Agar warned that if the government fails to secure a staff-level agreement with the Fund, then the rupee will incur further losses.

“If the IMF deal is done timely then it would appreciate but not that much,” said Agar.

In a bid to curb the black market and meet IMF demands, the government and exchange companies removed the dollar cap — imposed to stabilise the dollar’s value.

But that did not have a substantial effect on the local currency as the investors remain wary due to a surge in terrorism and the decline in State Bank of Pakistan-held foreign exchange reserves — which now stand at just $3.08 billion and will provide an import cover of 18.5 days.

ECAP General Secretary Zafar Paracha told Geo.tv that when the dollar cap was removed, it was estimated that the rupee would hit 270 and rebound, however, circumstances changed.

“Our reserves are at their lowest in nine years and terrorism — which isn’t restricted to Peshawar — is also surging,” he said, explaining the reason behind investors’ lack of confidence in the government.

The ECAP general secretary added that the ongoing political turmoil was also adding to the country’s woes as opponents are being arrested every other day and being put behind bars.

Paracha added that the black market gap has been met to a certain extent, but since the government has not opened the letters of credit (LCs) for importers, it will persist.

“The government has asked the importers to arrange dollars on their own […] this is why the black market is still active. If this does not stop, the gap might even increase,” he warned, urging the authorities to move towards import rationalisation.

Paracha added that amid the terror threat and other underlying reasons, the exports have not released their payments yet, resulting in the scarcity of dollars in the market.

Pakistan-IMF talks

A day earlier the IMF rejected the government’s circular debt management plan. 

And today it was reported that the Fund has conveyed to the authorities to undertake substantial qualitative and sustainable tax and non-tax revenue measures to fetch additional revenues for filling the projected gap of Rs600 billion in the fiscal framework.

The IMF delegation has asked the government to jack up the Federal Board of Revenue’s (FBR) tax collection target to align it with the projected nominal growth in the current fiscal year mainly with the help of a surge in the CPI-based inflationary pressures.

The Fund seems ready for providing an adjuster on flood expenditures once the fiscal framework is finalised. But it will depend on how much expenditures could be occurred on floods both on the development and non-development side of the budget especially through disbursements of stipends through the Benazir Income Support Programme (BISP).

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Finance Minister Meets With World Leaders at World Economic Forum in Davos

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During his attendance at the World Economic Forum in Davos, Switzerland, Finance Minister Muhammad Aurangzeb has met with officials of organisations and leaders of many nations.
Bangladesh’s Chief Advisor, Muhammad Younas, met with Mohammad Aurangzeb.
On the fringes of the World Economic Forum’s Annual Meeting 2025 Opening Banquet, there was an informal meeting.
Additionally, the Finance Minister met with Anwar Ibrahim, the Prime Minister of Malaysia.
Both leaders discussed economic cooperation and bilateral ties.
Muhammad Aurangzeb also had a meeting with Dp World’s Rizwan Soomro and Yuvraj Narayan.
They talked about how to strengthen Pakistan’s logistics and infrastructure systems to support trade.
“The Pakistani government is committed to advancing joint projects and values partnerships in both business-to-business and business-to-government cooperation,” the finance minister added.

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China will establish a $250 million EV production facility in Pakistan.

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As Islamabad looks to Beijing to work with it to establish industrial zones for the production of electronic vehicles, the media said Wednesday that China’s ADM Group would invest $250 million to establish an electric vehicle manufacturing unit in Pakistan.

With an even more ambitious target of 90 percent by 2040, the Pakistani government established the National Electric Vehicles Policy (NEVP) in 2019 with the goal of having 30 percent of all passenger cars and heavy-duty trucks be electric by 2030.

By 2030, the policy aimed to achieve 50% of new sales for two- and three-wheelers and buses, and by 2040, 90%.

As part of the Special Investment Facilitation Council’s efforts to draw in foreign investment, Radio Pakistan reported that the Chinese company ADM Group had announced an investment of $250 million to establish an EV manufacturing plant in Pakistan.

“The switch to EVs is anticipated to save billions of dollars by reducing the cost of fuel imports.”

More than 3,000 electric vehicle charging stations will be installed throughout Pakistan, a South Asian nation, as part of ADM Group’s $350 million investment in the EV industry last year.

Pakistan announced earlier this month that, as part of its ongoing energy sector reform aimed at increasing demand, it would reduce the power rate for operators of electric vehicle charging stations by 45 percent.

Additionally, financial programs for e-bikes and the conversion of gasoline-powered two- and three-wheeled vehicles are planned by the government.

On January 15, the government approved a lower tariff of 39.70 rupees ($0.14) per unit, which will take effect in a month. The previous tariff was 71.10 rupees.

The government anticipates that investors in the industry will see an internal rate of return of over 20 percent.

There are currently over 30 million two- and three-wheeled cars in Pakistan, and they use more than $5 billion worth of petroleum each year, according to a report that Power Ministry adviser Ammar Habib Khan provided to the government and that was covered by Reuters.

The paper estimates that the ministry will save around $165 million in gasoline import expenses each year by converting 1 million two-wheelers to electric motorcycles in a first phase, at an estimated net cost of 40,000 rupees per bike.

In September, BYD Pakistan, a joint venture between China’s BYD and the Pakistani automaker Mega Motors, informed Reuters that, in accordance with international goals, up to 50% of all vehicles purchased in Pakistan by 2030 will be electrified in some way.

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The government has introduced a comprehensive strategy to enhance industrial investment.

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Authorities are poised to execute an ambitious investment promotion strategy through a collaborative initiative between the National Institute of Public Administration (NIPA) and the Pakistan Administrative Staff College, aiming for substantial enhancements in industrial investment and economic development.

The Special Investment Facilitation Center (SIFC) will be instrumental in this transformative drive by establishing “Business Facilitation Centers” aimed at optimizing investment processes and attracting both domestic and foreign capital.

Principal features of the comprehensive plan encompass:

  1. Forming collaborative working groups to augment domestic and international investment prospects
  2. Formulating a comprehensive strategy to eradicate obstacles to industrial development
  3. Formulating a novel model to tackle issues in the execution of industrial projects
  4. Striving to enhance Pakistan’s international business rating by 50 points
    Targeting $20 billion in foreign industrial investments within the next five years.

The approach prioritizes digital transformation to enhance the transparency and efficiency of the investment process. SIFC’s strategy emphasizes fostering a favorable atmosphere for investors by streamlining bureaucratic processes and offering strategic assistance.

National administration officers are conducting ongoing study to identify and mitigate potential investment barriers, while a specialized research group is formulating a comprehensive strategy to solve current hurdles in industrial growth.

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