In September 2024, the IMF agreed to lend Pakistan about $7 billion under a 37-month arrangement. The money was not meant to arrive all at once. Pakistan would receive it in stages, provided the IMF was satisfied with its progress during each review. Banks and rupee traders watch these reviews closely because delays can affect when the next payment arrives. Since then, its review meetings and visits by IMF staff have drawn attention from banks and currency traders. A review can affect expectations about how many dollars Pakistan will receive and how the State Bank will manage the rupee.
Typically, the first indication comes from staff missions. The teams visit Islamabad and Karachi for talks with the Finance Ministry and the State Bank of Pakistan, and the resulting end-of-mission statement is closely examined by banks, exporters, and treasury desks. Particular attention is paid to indications of how much freedom the central bank has to manage the rupee, including references to continued exchange rate flexibility or the gap between interbank and open-market rates. A delayed statement or one that discusses items yet to be resolved can leave markets waiting for a clearer decision.
After the talks, IMF staff and Pakistani officials may reach an agreement, but the money is not released straight away. The IMF’s Executive Board still has to approve the review before Pakistan receives the next payment. How much is released depends on the payment schedule agreed under the program. Newcomers often find market reactions coming earlier than expected. In FX trading with a focus on the rupee, participants may begin pricing in a successful review once a staff-level agreement is announced, although Executive Board approval is still required before funds are released. Delays between the two stages can also affect expectations.
Budget season brings a domestic flavour to the calendar. Pakistan’s federal budget, which is usually presented every June, is required to support the revenue targets and fiscal commitments agreed with the Fund. Disagreements over tax measures have often been made public in the weeks leading up to the federal budget’s parliamentary approval. A period of visible friction can coincide with stronger demand for dollars from importers and corporate treasurers, who may hedge their currency exposure before the situation becomes clearer. A budget that meets IMF requirements may ease some of that pressure.
Between IMF reviews, the amount of dollars held in Pakistan’s reserves can also affect the rupee. The program has been used to restore net international reserves, which has involved the State Bank buying dollars from the interbank market, potentially limiting upward pressure on the rupee. This has disappointed those hoping for a rise in the currency as remittances increased and the current account improved. Changes in the State Bank’s dollar purchases can be as important as the purchases themselves when dealing in rupee-linked FX trading.
Credit rating actions also tend to attract attention around program milestones. An upgrade by agencies like Fitch, S&P, and Moody’s following progress under an IMF program can improve Pakistan’s chances of returning to international debt markets, which in turn helps shape expectations about future dollar supply. Sometimes the change in sentiment can be greater than the immediate change in disbursements. The program schedule is not always reliable, since past arrangements with the Fund have stalled or remained incomplete amid political developments, oil prices, monsoon flooding, and global dollar strength. As long as the current IMF program stays on track, reports from Washington may give traders a better idea of where the rupee is headed. They still need to watch what is happening in Pakistan’s markets.