The Pakistani rupee (PKR) recovered sharply on Friday after falling to a record low of PKR 300 a day earlier. Pakistani media outlet GeoTV reported that the PKR showed recovery amid an "improved political situation and a decrease in demand from the importers". The local currency gained PKR 13.68 per US dollar to trade at 285.25 in the interbank market, after falling to PKR 300 in the last trading session, the report said.

Why the Pakistan rupee showed recovery

This is because of two reasons. First, market sources said, it was because of the decrease in demand of importers as oil payments were released a day earlier. Second, Pakistan's Supreme Court declared Pakistan Tehreek-e-Insaf (PTI) chairman Imran Khan’s arrest "illegal".

Tahir Abbas, Arif Habib Limited's Head of Research, was quoted as saying: "Less demand coupled with an improved political situation has led to this sharp recovery."

Foreign reserves also decline

Meanwhile, amid political instability and economic crisis, the State Bank of Pakistan's (SBP) foreign reserves continue to decline due to loan repayment.

The foreign exchange reserves fell to $4.38 billion in the week ending May 5, central bank data showed on Thursday, as per GeoTV. In its weekly bulletin, the SBP said its reserves decreased by $74 million due to external debt repayment.

Pakistan's foreign reserves have seen a sharp decline to a critically low level in recent months. The current reserves are not sufficient for even a month's imports — "a position that has remained the same as the country faces an acute balance of payments crisis", as per the report.

IMF bailout

Pakistan, which looks forward to a $1.1. billion bailout from the International Monetary Fund (IMF), needs significant additional financing for a successful completion of the long-stalled ninth review of the bailout package, the IMF said in a scheduled press conference on Thursday.

A staff-level accord to release a $1.1 billion tranche out of a $6.5 billion IMF package has been delayed since November, with nearly 100 days gone since the last staff-level mission to Pakistan. That is the longest such gap since at least 2008.

"Our team is very heavily engaged of course with the Pakistani authorities, because Pakistan indeed faces a very challenging situation," said Julie Kozack, IMF spokeswoman, was quoted by PTI as saying.

The IMF's statement came after the United Arab Emirates, Saudi Arabia and China came to Pakistan's assistance in March and April with pledges that would cover some of the funding deficit.

Last week, the IMF reportedly rejected Pakistan's assertion that it has fulfilled all the necessary conditions to qualify for funds under a previously agreed-upon loan facility.

Pakistan's economic and political turmoil

The sharp moves in PKR and drop in foreign reserves were seen amid the dramatic arrest of former Pakistan Prime Minister and PTI party chairman Imran Khan on Tuesday. At a time when Pakistan must focus on stabilising its economy, the country is staring at a deep political crisis with national elections around the corner and key political leader Khan arrested.

#BreakingNews | Pakistan's Ex-PM Imran Khan arrives at #Islamabad High Court for bail hearing amidst heavy security

CNN News18's @Zakka_Jacob explains what's next in #PakistanJoin the broadcast with @poonam_burde pic.twitter.com/eHEffRH2ha— News18 (@CNNnews18) May 12, 2023

Khan was arrested on Tuesday outside Islamabad High Court in connection with the Al-Qadir Trust case. Massive protests and violence followed the dramatic arrest. Clashes between police and Khan's supporters were reported. Supporters of Imran Khan also stormed the Pakistan Army headquarters in Rawalpindi and the Corps Commander’s residence in Lahore after the arrest.

Amid this political chaos and spiralling economy, what does the Pakistan government, led by Prime Minister Shahbaz Sharif, aim to do?

An attempt to delay Pakistan election?

Security Analyst Pathikrit Payne said that the bailout is the last thing on Shahbaz Sharif's mind, or anyone else's for that matter. He opined that Shahbaz Sharif and Chief of Army Staff of Pakistan Army Asim Munir may be trying to delay elections. Elections in Pakistan are slated for October this year. Meanwhile, elections to two provinces were scheduled to be held this month, but couldn't happen.

Read more about the issue here

"Shahbaz knows that if Imran Khan comes to power, his life would be in a difficult time...Imran Khan himself doesn't have any plans for the economy. Right now, he is the most popular person in the country. If he wins and comes to power in the next six months after winning, he will become more unpopular than Shahbaz Sharif because that's the predicament of running the country today," Payne told News18.

Many analysts believe that Imran Khan and Asim Munir don't share a good bond. Therefore, the civilian government seems to be on the same page as the Army. Hence, Payne said that in case Khan comes to power in Pakistan, he would either be indicted in another case or in some way he will be prevented from coming to power.

#BreakingNews | #ImranKhan at Islamabad High Court, what's next for him?

PTI might become the next version of TTP: @live_pathikrit shares his views@TejinderSsodhi shares more details#Pakistan | @ridhimb pic.twitter.com/gsMsvEiO0b— News18 (@CNNnews18) May 12, 2023

Apart from Imran Khan's popularity, Shehbaz Sharif fears that economic hurdles too would make elections difficult for his party and the current coalition government.

ALSO READ | Pakistan economic and political crisis spirals on: Why the Shehbaz Sharif govt wants to delay Punjab polls

Meanwhile, it is believed that the judiciary and the Supreme Court is more sympathetic to Imran Khan.

Therefore, analysts believe the chaos in Pakistan is likely to intensify in the coming days. Imran Khan has over 100 cases filed against him. Payne added that Khan's party "PTI might become the next version of TTP". Amid this, Pakistan could not see any respite from the economic crisis it has been dealing with for so long. Despite strict measures of imposing new taxes and removing subsidies, the country remains in the trap of a viscous economic crisis.

(With inputs from News18)

First Published:May 12, 2023 4:34 PM IST