Pakistan’s current account (C/A) surplus is expected to continue in April, thanks to over $2.5 billion in remittances. However, despite the higher remittances and surplus, the demand for the US dollar remains high, which has not allowed the Pakistani rupee to strengthen against the greenback. This is due to tight control of dollar movement by the State Bank of Pakistan (SBP).
?Currency dealers have reported that the exchange rate has not reflected the situation, even with the improved availability of dollars in both interbank and open markets. The big importers are still unable to purchase dollars from the interbank market, and the opening of letters of credit has only been made easy for smaller amounts.
In March, remittances increased to $2.532 billion, a rise from the previous month’s $1.987 billion, but a decline of 10.8% in the first nine months of the 2022-23 fiscal year. Although the higher inflows are expected to continue, currency dealers and experts believe the exchange rate trend will not change due to low forex holdings of the SBP and the US dollar’s bullish trend against all major currencies worldwide.
Additionally, the rupee’s fate is linked with the resumption of the International Monetary Fund (IMF) programme and political stability, which shows no signs of improvement.
Market experts predict that if the IMF signs a staff-level agreement, the rupee will temporarily gain some strength, but in the absence of a deal, it will be difficult to forecast where the rupee will settle. Furthermore, the inflows of export proceeds have slowed down in the past few weeks, with exporters holding their proceeds.
This harms the exchange rate, and currency traders believe that exporters are looking for another jump in the dollar price. Exporters were the only segment of the economy that benefited from the rupee’s depreciation.