| KARACHI: Despite maintaining stability for over two months, currency experts have warned that the exchange rate may face shocks in March.
A currency dealer in interbank market said that many factors would converge to determine the future of exchange rate by end of March.
Market experts have emphasised that the third quarter economic performance will determine the outlook for the last quarter and the entire fiscal year.
Currency experts have noted that the inflows of dollars are below market expectations.
Performance in third quarter crucial for economic outlook
Both remittances and foreign direct investment (FDI) fall significantly short of anticipated levels. Remittances during the first half of the fiscal year were six per cent lower, presenting a serious concern.
In the previous fiscal year FY23, remittances were 25pc lower than the preceding year, resulting in a loss of $4 billion. The current fiscal year’s remittances are even lower than the previous year.
The World Bank, in its report issued at the end of last December, predicted total remittances at $22bn for FY 24.
State Bank of Pakistan (SBP) Governor, Jameel Ahmed, recently mentioned that remittances have started increasing on a month-on-month basis.
There was also a consensus among market players that, due to the general elections, inflows would decrease in the current period, impacting overall inflows for the remainder of this fiscal year.
“We place great hope in the Special Investment Facilitation Council (SIFC), but inflows during the current year seem unlikely,” said Anwar Bhai, a currency expert.
The SIFC has a target of $100 billion in investment inflows over the next three to five years. Mr Anwar suggests that the SIFC may perform better after the elections and the establishment of a new government in Islamabad.
Of greater concern to currency experts is the last tranche of $1.2bn from the International Monetary Fund (IMF), which will be decided in March.
The caretaker government remains hopeful of receiving it, although sources close to power corridors suggest that a new government may renegotiate with the IMF. Elections are scheduled for Feb 8, and a new government will be formed.
The new government will need to convince the IMF to continue current economic policies. All political parties are announcing various economic benefits for the people, such as providing 300 units of free electricity for the general public.
However, this appears implausible given the main issues faced by the general public, such as rising power prices and supply problems. The caretaker government has increased electricity and gas prices to meet IMF conditions.
“How will the IMF accept such proposals? They will only create hurdles for future relations with the donor agency,” said the sources.
The caretaker finance minister has repeatedly stated that Pakistan needs another bailout package to sustain economic growth.
Published in Dawn, February 4th, 2024 |
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