KARACHI, July 31, 2024 – The Pakistani rupee continued its downward trend for the third consecutive day against the US dollar on Wednesday. The rupee depreciated by 8 paisas, closing at PKR 278.74 to the dollar compared to the previous day’s closing of PKR 278.66 in the interbank foreign exchange market.
This persistent decline in the rupee’s value marks the third straight day of losses during the current week. Currency experts attribute this fall to increased dollar demand for import and corporate payments, coupled with a dip in foreign exchange reserves.
According to the State Bank of Pakistan (SBP), overall foreign exchange reserves fell by $369 million, dropping from $14.704 billion the previous week to $14.335 billion. This broader decline in reserves underscores 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.
“The fall in the rupee value is primarily driven by the pressure on dollar demand for imports and corporate settlements,” said a senior currency analyst. “The declining reserves add another layer of complexity, reducing the central bank’s ability to stabilize the currency.”
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.
“The upcoming IMF inflows are likely to offer temporary relief, but sustained economic stability requires comprehensive policy measures,” remarked an economist. “The government needs to focus on structural reforms to enhance economic resilience and reduce dependency on external financing.”
In the short term, market participants will closely monitor the central bank’s actions and any additional policy measures aimed at stabilizing the rupee. The continued volatility in the currency market reflects broader economic challenges, including inflationary pressures and a widening current account deficit.
The rupee’s performance against the dollar remains a critical indicator of the country’s economic health. As Pakistan navigates these financial challenges, maintaining a balance between managing external debt obligations and sustaining reserve levels will be key to achieving long-term economic stability.