The US dollar soared to Rs138 in the interbank market at one point on Tuesday as Pakistani government announced it will seek bailout from International Monitory Fund (IMF), which will also have implications on CPEC.
According to analysts, the rapid increase in the dollar is owing the government’s decision to approach the International Monetary Fund (IMF) to deal with the prevalent financial crisis.
Pakistan’s Finance Minister Asad Umar in a video message on Monday night said talks with the IMF will start “immediately” as Prime Minister Imran Khan has given a go-ahead to do so. He said the country is going through a tough time, which has been left behind by the previous government. “We have to find a way to get out of this difficult situation.”
The decision to seek support from IMF will have scores of negative consequences for the debt-ridden country as IMF would demand Pakistan to reduce its non-development expenses to bring down budget deficit.
Analysts believe one of the condition of such bailout will be disclosure of all projects related to China Pakistani Economic Corridor (CPEC), which has been shrouded in mystery so far. CPEC is the flagship project of China’s Belt-Road Initiative (BRI).
Currency dealers fear the alarming increase in rates will fan panic in the market for dollars, causing a buying frenzy.
They speculate that the sudden increase in the price of the USD could be a result of rupee devaluation — the fifth time since Dec 2017 — by the State Bank of Pakistan (SBP) in order to secure a bailout package from the International Monetary Fund (IMF). The Fund has demanded the government devalue the rupee by at least 15 per cent.