KARACHI, Jan 1: Currency experts see no hope for recovery of the local currency against the dollar even after significant improvement in the foreign exchange reserves.

Experts said the stability in exchange rate had been achieved at the cost of 23 per cent devaluation of rupee against the dollar.

“The panic-like situation is now over and the importers are no more eager to buy dollar much earlier than they actually need,” said Atif Ahmed, a currency dealer.

The evaporation of foreign exchange reserves, which started falling since Oct 2007, was the real weakness, which created a panic-like situation and the demand for the greenback skyrocketed.

“The exchange rate looks normal at this level with a massive depreciation of rupee, while the businessmen also seem settled at this rate,” said Atif.

However, this massive depreciation of rupee inflated the economy and caused serious damage to the exporters normally depend on imported constituents by 30-40 per cent.

This exchange rate-based inflationary pressure forced the banks to increase their lending rates to get ‘real profit.’ At the same time, the State Bank stood up to get control over inflation and increased the policy discount rate up to 15 per cent.

The industrialists and traders have been raising voices against the lending rate asking the government to reduce the mark up. They said banks were charging 20 per cent mark up that makes industry unviable.

The industry is facing double negative impact as the imported raw material and machinery are costlier due 23 per cent devaluation of rupee, while higher interest rate adds more cost to the products.

“The exchange rate stabilised after inflow of $3.1 billion IMF loan,” said Abid Saleem, an analyst. He said the impact of IMF loan, which assured total inflows of $7.6 billion in 23 months, changed the sentiment of the market.

“Though there is no big change in the reserves position as it is still at $9.6 billion much lower than the $16 billion 14 months back but the impact was much bigger than the inflows,” said Abid.

Analysts also pointed out that the unexpectedly low oil prices and massive fall in commodities prices were the reasons for stabilisation of exchange rate. The outflow of foreign exchange started falling after the massive decline in commodity prices.

“The recovery of rupee to its previous level is almost impossible. The economic managers are making no efforts to strengthen rupee, while the businessmen look settled at this level of exchange rate,” said Abid.

The rupee faced record depreciation in short span of time reflecting the weakness of the economy and global impact of high commodity prices, which flushed out reserves of the country.

Pakistan spent about $12 billion alone on import petroleum products during last fiscal year.