KARACHI: Bankers and currency dealers have anticipated over $2.5 billion in remittances in April like the preceding month which helped the country to record a current account (C/A) surplus.

At the same time, they believe the country could post a C/A surplus for the second month in a row which would reduce pressure on the dwindling foreign exchange reserves held by the State Bank of Pakistan (SBP).

“Despite higher remittances and C/A surplus, the demand for the US dollars remained high which did not allow the rupee to feel easy against the greenback,” said Atif Ahmed, a currency dealer in the interbank market.

With the improved availability of dollars both in interbank and open markets, the exchange rate did not reflect the situation mainly because of tight control of dollar movement by the SBP.

Bankers said the opening of letters of credit has been made easy for smaller amounts and the big importers are still unable to buy dollars from the interbank market.

“Rupee traded in a narrow range of 283.50 to 284.50 per dollar during the last week, even though the market was flush with liquidity coming from the surprise $654m C/A surplus and higher than expected remittances,” said Faisal Mamsa, CEO of Tresmark.

The remittances in March increased to $2.532bn against $1.987bn in the preceding month. However, the remittances in March 2022 were $2.834bn. So far, the remittances show a decline of 10.8pc in the first 9 months of this 2022-23.

Currency dealers and experts believe the higher inflows would not change the exchange rate trend due to low forex holdings of the SBP and the US dollar’s bullish trend against all major currencies the world over.

“The volatile political situation, however, keeps the rupee under pressure,” said Mr Mamsa, adding that the orderly disruption in imports, weak global demand, political crisis and ongoing uncertainty about the IMF tranche have shattered market confidence.

The rupee’s fate is now linked with the resumption of the IMF programme and Fund has linked it with political stability, which shows no signs of betterment, he said.

The currency dealers believe the rupee will stay range-bound (282-288) in the coming days. Market experts said if the IMF signs a staff-level agreement, the rupee will get some strength, but only temporarily. However, in case of no deal, it will be difficult to forecast where the rupee will settle.

Bankers said the inflows of export proceeds have slowed down for the last couple of weeks. The exporters have once again started holding their proceeds which harm the exchange rate. The currency traders believe that exporters are looking for another jump in the dollar price.

Exporters were the only segment of the economy that largely benefitted from the rupee depreciation.

Published in Dawn, May 2nd, 2023