Despite a period of stability lasting over two months, currency experts are cautioning that the exchange rate may face challenges in March due to various converging factors. The third-quarter economic performance is seen as a key determinant for the outlook of the last quarter and the entire fiscal year.

Concerns have been raised about below-expectation inflows of dollars, with both remittances and foreign direct investment (FDI) falling significantly short of anticipated levels. Remittances during the first half of the fiscal year were six percent lower, presenting a serious concern, especially given the 25 percent decrease in remittances during the previous fiscal year.

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The current fiscal year’s remittances are even lower than the preceding year, raising questions about the overall economic performance. The World Bank’s prediction of total remittances at $22 billion for FY24 provides a target that experts are closely monitoring.

Market players are considering the impact of general elections on current inflows, anticipating a decrease during this period. The Special Investment Facilitation Council (SIFC) has been identified as a potential contributor to inflows, with hopes for improved performance after the elections and the formation of a new government in Islamabad.

Of greater concern is the impending decision on the last tranche of $1.2 billion from the International Monetary Fund (IMF), scheduled for March. The caretaker government remains optimistic about receiving it, but sources suggest that a new government may renegotiate with the IMF after the elections.

The need for a new bailout package to sustain economic growth has been emphasized by the caretaker finance minister, highlighting the challenges of aligning economic policies with the IMF’s conditions in the face of various political promises made during the election season. The outcome of these negotiations will significantly impact the economic landscape in the coming months.