The US dollar has continued its upward trajectory against the Pakistani Rupee (PKR), reaching a year high of Rs166.98 in the interbank foreign exchange market on Thursday.
This marks the fourth consecutive day of gains for the dollar against the PKR, with the foreign currency concluding at Rs166.87.
Currency experts are attributing the persistent surge in the dollar’s value to heightened demand for the greenback, particularly for external payments. The increasing deficit in both trade and the current account is identified as a significant factor contributing to the market’s unease.
The sustained appreciation of the US dollar is posing challenges for the Pakistani economy, as it raises concerns about the country’s external financial obligations. Experts argue that the rising demand for the dollar, coupled with the growing trade deficit, is creating a sense of urgency for an immediate influx of foreign currency to meet external payment liabilities without exerting additional pressure on the exchange rate.
Over the past four trading days, the local currency has depreciated by Rs1.63 against the dollar, further highlighting the volatility in the foreign exchange market. To provide context, the exchange rate stood at Rs165.62 on August 27, 2021, indicating a notable decline in the value of the PKR against the dollar in a relatively short period.
The trade deficit, which occurs when a country’s imports surpass its exports, has been a persistent challenge for Pakistan. A widening trade deficit puts pressure on the country’s foreign exchange reserves and impacts the overall stability of the economy. Addressing this issue requires a comprehensive strategy that includes measures to boost exports, manage imports efficiently, and attract foreign investments.
The current situation underscores the importance of implementing measures to bolster the country’s foreign exchange reserves and address the structural issues contributing to the trade deficit. Additionally, policy interventions that encourage export-oriented industries and promote a favorable business environment could play a crucial role in stabilizing the exchange rate.
The government and relevant authorities are likely to face increasing pressure to formulate and implement policies that address the root causes of the trade deficit, ensuring a more sustainable and balanced economic outlook. As the dollar continues to strengthen against the PKR, it becomes imperative for Pakistan to take proactive measures to mitigate the impact on its economy and pave the way for a more robust financial future.
