Pakistan’s currency plunges to historic low amid IMF doubts

Pakistan's currency plunged to an all-time low against the dollar on Tuesday, amid uncertainty about the fate of a stalled International Monetary Fund (IMF) loan as the country struggles to bridge deepening current account and fiscal deficits.

The rupee depreciated to more than 205 for one dollar in the interbank market at the close of Tuesday, central bank data shows.

That continued a weeklong loosing spree, after the IMF warned that the fiscal consolidation measures Pakistan's government announced in last week's annual budget were not enough to revive the loan.

Pakistan secured the $6 billion bailout package from the global lender in 2019, but the programme stalled after the payout of three tranches, as Islamabad could not meet the fund's requirements.

The South Asian nuclear power might face a default on its international liabilities if the IMF package isn't revived, Finance Minister Miftah Ismail said.

The stark warning comes as the country's current account deficit swelled to $13 billion since the start of the current fiscal year.

The fiscal deficit was also expected to exceed 5% of the country's gross domestic product, or more than $18 billion by the end of the financial year, which falls on June 30, according to the Finance Ministry.

Massive funding from multilateral and bilateral sources like allies China and Saudi Arabia will be required to bridge these gaps, economist Suhail Ahmed said.

Apart from the uncertainty about the IMF loan, a strengthening of the dollar has also contributed to the depreciation of Pakistan's currency, Ahmed added.