KARACHI: With fluctuations in the exchange rate, the rupee appreciated by Rs1.12 against the US dollar during the current week giving a positive picture about the weak economy.

The start of talks with the IMF for disbursement of $1 billion has improved the market sentiments evident from 70 paise recovery made by the local currency against the dollar on the first day of the outgoing week.

The next day, the dollar fell further by 43 paise to 185.62. With another 17 paise gain, the rupee recovered a total of R1.30 in three consecutive sessions

However, the recovery of local currency was not on any solid grounds but on expectations of possible inflows from the IMF and rollover of $2.4bn loans from China.

A delegation led by Finance Minister Miftah Ismail had held talks with the IMF officials in Washington but the there was little hope for any immediate relief as the conditions set for the release of $1bn tranche are yet to be met.

One of the conditions is to abolish the subsidies on petroleum products and electricity given by the Imran government. Since doing away with the subidies carries a political cost, the new government is probably waiting for an appropriate time for the purpose.

There is almost a consensus in the financial circle that the subsidies will be over next month.

As the uncertainty persists, the dollar on April 28 rose by 42 paise against the local currency to close at Rs185.87 on high demand from importers. Currency dealers said even inflows from the IMF would not strengthen the exchange rate in rupee’s favour.

The local currency, however, showed some strength and recovered 24 paise on Friday against the dollar at Rs185.63.

Pakistani is in dire need of improving its foreign exchange reserves which have been falling since August 2021. The collapse of Sri Lankan economy has created fears in the financial market dealing with the currencies. Though there is still no dollar buying from public, there are concerns in the business circle about the uncertainty on political horizon that may cost the economy heavily.

The exports and remittances are posting robust growths while the Large-Scale Manufacturing also exhibited a record expansion of 8.2 per cent in February. The depleting foreign exchange reserves amid political uncertainty have weakened the local currency.

Published in Dawn, April 30th, 2022