The Pakistani Rupee (PKR) strengthened against the US Dollar for the second consecutive day in the interbank foreign exchange market on Wednesday, closing at Rs175.48 per US Dollar, a recovery of 24 paisas from the previous day’s rate of Rs175.72.
This comes after the rupee had hit an all-time low of Rs176.20 to the dollar on November 29, 2021.
The rupee’s rebound to dollar is largely attributed to the recent financial agreement between Pakistan and Saudi Arabia, which has infused much-needed confidence into the local currency market. On November 29, 2021, the State Bank of Pakistan (SBP) and the Saudi Development Fund finalized an agreement for a $3 billion assistance package, placing the funds with the SBP. This influx of foreign reserves is seen as a stabilizing force for Pakistan’s economy, helping to alleviate some of the pressure on the rupee.
Currency experts highlighted that this financial support has eased concerns about the country’s foreign exchange reserves and provided a buffer to the rupee, which had been under severe strain due to rising import payments and external obligations.
In addition to the financial assistance, Pakistan’s export sector has also shown positive performance, offering further relief to the struggling currency. According to Abdul Razzak Dawood, Adviser to the Prime Minister on Commerce, Pakistan’s exports surged by 33% in November 2021, reaching $2.93 billion compared to $2.17 billion during the same period last year. This robust export growth has been instrumental in balancing the country’s trade deficit, contributing to the rupee’s gradual recovery.
However, despite these gains, currency experts caution that Pakistan’s high import bill remains a significant challenge to the rupee’s long-term stability. Rising global commodity prices and increased demand for imported goods have continued to exert pressure on the country’s foreign reserves, which could pose risks for the local currency if not addressed.
Looking ahead, experts believe that while the Saudi assistance package and growing exports have provided temporary relief, sustainable measures will be needed to ensure the rupee’s continued recovery. A balanced trade policy, reduced dependency on imports, and a stable foreign investment climate are viewed as essential components in maintaining rupee stability in the longer term.
For now, the rupee’s recent gains against the dollar offer a glimmer of hope for Pakistan’s economy as it navigates a challenging global financial landscape.
