Cash-strapped Pakistan's rupee plunges amid talks with IMF

A Pakistani money trader shows U.S. 100 dollar notes at a currency exchange office, in Lahore, Pakistan, Thursday, Jan. 28, 2023. Cash-strapped Pakistan's currency plunged Thursday against the dollar after the government indicated it was ready to comply with tough conditions set by the International Monetary Fund for the next tranche of its bailout package. (AP Photo/K.M. Chaudary)

ISLAMABAD (AP) — Cash-strapped Pakistan’s currency plunged Thursday against the dollar after the government indicated it was ready to comply with tough conditions set by the International Monetary Fund for the next tranche of its bailout package.

Pakistan is seeking a crucial installment of $1.1 billion from the fund — part of its $6 billion bailout package — to avoid default. Talks with the IMF on reviving the bailout stalled in the past months.

The rupee closed at 230 to the dollar on Wednesday. It slipped further, trading at 255 for $1 within hours of the market reopening Thursday. Hours later, Pakistan's Central Bank confirmed that the currency had plummeted by 9.6% against the U.S. dollar.

Analyst Ahsan Rasool says the rupee’s decline is a sign that Pakistan was close to securing the much-needed loan from the IMF.

Financial expert Malik Bostan said the value of the rupee dropped mainly due to the delay in the revival of the IMF's bailout talks, amid depleting foreign exchange reserves, but expected it to stabilize as the negotiations pick up again.

The rupee's slide comes days after Prime Minister Shahbaz Sharif said his government was ready to adhere to the “tough conditions of the IMF" to revive the $6 billion bailout package, which has been on hold for the past several months.

Pakistan is currently grappling with one of the country’s worst economic crisis amid dwindling foreign exchange reserves. That has raised fears that Pakistan could default, although Sharif insists it pulled the country from the brink of the default when it took over last year.

Sharif has blamed Prime Minister Imran Khan and his government for the economic malaise. Khan was ousted in a no-confidence in Parliament in April, and has since been campaigning for early elections.