KARACHI: The rupee continued its recovery for the second day on Wednesday and appreciated by Rs2.95 against the US dollar to close at Rs273.33 in the interbank market.

Currency dealers and experts said that the local currency has found some strength in the range of Rs270-Rs276 since the dollar rate was uncapped.

Bankers were hopeful that the exchange rate in the current range could be considered stable which is encouraging exporters and common households to sell their dollar holdings during this month.

Bankers were sure that the remittances would increase since the grey market lost attraction after remitters start getting higher rates both in interbank and open markets.

Pakistan has experienced lesser remittances during the last three months mainly due to a wide difference between the grey market and controlled bank rates. It diverted about 15pc remittances towards the illegal channel.

However, the growing need for foreign exchange reserves has created fear and disappointment in the financial circle as well as trade and industry.

Former SBP acting governor Dr Murtaza Syed wrote on Wednesday that for each of the next five years, Pakistan owes the world $25bn in principal repayments. It will also need at least $10bn to finance the current account deficit bringing total external financing needs to $35bn a year between now and 2027.

He further said that for each of the next five years, the government needs to pay 5pc of GDP to service the debt it owes to residents and foreigners while the country’s total tax collection is less than 10pc of GDP.

Several analysts and independent economists think the government has no option but to accept the entire conditions to save the country from the default ‘that too for a brief period.’

“We have no idea what would happen once the government accepts the IMF’s pre-conditions but sure that cost of doing business will have no space for our costly products in the international markets,” said Amir Aziz, a manufacturer and exporter of textile-based finished products; mostly to Europe.

T-bill auction: Like the external front, the government is also struggling on the domestic front with the shortage of revenues and borrowing from banks.

The government borrowed Rs464bn through T-bills auction on Wednesday against the target of Rs800bn. The returns for three-, six- and 12-month T-bills were 17.99pc, 17.84pc and 17.95pc respectively. Total bids for the auction were Rs858bn.

Published in Dawn, February 9th, 2023