Karachi, July 30, 2024 – The Pakistani Rupee fell for the second consecutive day against the US dollar on Tuesday, pressured by foreign payment demands. The rupee declined by 16 paisas, closing at PKR 278.66 to the dollar, compared to the previous day’s rate of PKR 278.50 in the interbank foreign exchange market.
Currency experts attributed the rupee’s depreciation to increased dollar demand for import and corporate payments. They noted that end-of-month oil payments significantly pressured the rupee. Additionally, the fall in foreign exchange reserves exacerbated the situation, contributing to the currency’s depreciation.
According to the State Bank of Pakistan (SBP), overall foreign exchange reserves dropped by $369 million, decreasing from $14.704 billion the previous week to $14.335 billion. This broader decline in reserves highlights the challenges faced by Pakistan’s economy, particularly in managing external debt and sustaining reserve levels.
The dip in reserves is a critical issue, as it affects the country’s ability to meet its international financial obligations and maintain currency stability. Reduced reserves limit the SBP’s capacity to intervene in the foreign exchange market to support the rupee.
Looking ahead, experts believe that the rupee will remain range-bound against the dollar in the coming days. Anticipated inflows from the International Monetary Fund (IMF) under the $7 billion Extended Fund Facility (EFF) are expected to provide some support to the rupee. These funds are crucial for bolstering the country’s reserves and alleviating some of the pressure on the local currency.
However, underlying structural issues, such as the high import bill, energy sector deficits, and fiscal imbalances, continue to pose significant challenges. Addressing these issues is essential for achieving long-term economic stability and reducing dependency on external financial assistance.
Despite the anticipated IMF inflows, the rupee’s outlook remains uncertain. Policymakers face the daunting task of implementing reforms to stabilize the economy and ensure sustainable growth. The focus will likely be on measures to boost exports, control inflation, and attract foreign investment.