HE `management` of the exchange rate by the State Bank, allegedly at the behest of the government, to ward off a 6 steeper rupee devaluation due to the dollar crunch has led to many unforeseen complications in the foreign exchange market in recent months. Initially, we saw the gap between the interbank and open market dollar-rupee rate widen to unprecedented levels, which soon resulted in the creation of a black or grey market offering a much higher rate than the one given by the money exchange companies. No wonder, the dollar vanished from the open market as exchange firms were unable to attract sellers of the currency again, because of what they called a `voluntary` cap on the dollar price to help ease pressure on the rupee. Pakistanis living abroad started rerouting their remittances through the black market for a better, higher rate.

Thus, when on Tuesday, the Exchange Companies Association of Pakistan announced the removal of the `voluntary` cap on the open market dollar-rupee rate, it was seen as part of the bank`s effort to again ensure a market-based exchange rate, as demanded by the IMF for resumption of its stalled loan programme and to eliminate the black market.

But old habits die hard. Very quickly after the removal of the limit on the open market dollar rate on Wednesday, someone intervened to manage the parity at a `reasonable`level. The dollar in the open market was traded at Rs252.50 during the early hours, but had depreciated to Rs243 by 11 am. In all, the rupee dropped less than 1pc of its value during the entire day from the previous day`s level. It is unclear where the directions to the exchange firms to let the home currency depreciate `slowly` came from.

Nor is it known whether these were meant to avert a rowdy rupee depreciation or were an attempt to again cap the rate at a slightly higher level. What is clear is that despite its pronouncements to the contrary, the government is still undecided on IMF conditions and looking for a way around them by securing funding from `friendly` countries. True, elections are hardly a few months away, and the government does not want to take unpopular decisions and burden the people further for fear of losing votes. But will it succeed in its plans? Few would wager a bet on it.