Karachi, July 26, 2024 – The Pakistani Rupee gained 7 paisas against the US dollar on Friday, closing at PKR 278.34 from the previous day’s closing of PKR 278.41 in the interbank foreign exchange market. This appreciation is attributed to foreign inflows in the form of export receipts and remittances, which provided much-needed support to the local currency.
Currency analysts explained that while the rupee was under pressure during the day due to it being the last trading day of the week and a decline in the State Bank of Pakistan’s (SBP) foreign exchange reserves, the inflows helped offset this pressure. The SBP recently announced a significant drop of $397 million in its official foreign exchange reserves for the week ending July 19, 2024. The reserves fell from $9.424 billion on July 12, 2024, to $9.027 billion by the end of the week. This decline was primarily due to external debt payments made by the Pakistani government.
Despite this reduction in reserves, the rupee managed to gain strength due to the steady flow of foreign currency through exports and remittances. Analysts noted that these inflows are crucial for maintaining the rupee’s stability, especially during periods of financial strain.
Impact of External Sector on Rupee Stability
The overall foreign exchange reserves of the country also saw a reduction, falling by $369 million to $14.335 billion compared to $14.704 billion in the previous week, according to the SBP. This broader decline in reserves highlights the challenges faced by Pakistan’s economy, particularly in managing external debt and sustaining reserve levels.
“The rupee’s slight gain against the dollar is a positive sign, indicating that foreign inflows are playing a pivotal role in supporting the currency,” said Hamid Shah, a currency analyst based in Karachi. “However, the ongoing decline in foreign exchange reserves remains a concern and could exert pressure on the rupee in the future.”
Future Outlook
Looking ahead, currency analysts are hopeful that the improved external sector will continue to support the rupee. The steady inflows from exports and remittances are expected to provide a buffer against potential declines in reserves and external debt payments.
“The rupee is likely to stabilize in the coming days if the current trend of foreign inflows persists,” Shah added. “The government and the central bank need to manage external debt repayments carefully and focus on boosting exports to maintain a healthy level of foreign exchange reserves.”
The slight gain in the Pakistani Rupee against the US dollar, despite the pressure from declining reserves, underscores the importance of foreign inflows in maintaining currency stability. As the country navigates economic challenges, the role of exports and remittances will be critical in supporting the rupee and ensuring financial stability.