Karachi, November 13, 2023 – The US dollar maintained its dominance over the Pakistani Rupee (PKR) for the 15th consecutive session, breaching the PKR 287.55 mark in the interbank foreign exchange market on Monday.
The relentless surge of the dollar is attributed to heightened demand for the greenback in import transactions and corporate payments, exerting immense pressure on the local currency.
The Pakistani Rupee has experienced a significant downturn, witnessing a substantial drop of PKR 8.76 or 3.14 percent from its position at PKR 278.79 since the commencement of this losing streak on October 20, 2023. On a day-to-day basis, the rupee faced a decline of 52 paisas compared to its last Friday’s closing rate of PKR 286.90 against the dollar on November 10, 2023, in the interbank foreign exchange market.
The escalating pressure on the local currency is further compounded by the ongoing International Monetary Fund (IMF) review of Pakistan’s bailout package. Initiated on November 2, 2023, this assessment is anticipated to conclude by December 15, 2023. Its outcome holds paramount significance as it will determine Pakistan’s eligibility for the second tranche of $700 million, scheduled for disbursement in December. The first installment of $1.2 billion was released in July as part of the standby arrangement.
Market analysts attribute the rupee’s plight to a decline in export proceeds, prompting the central bank to engage in active dollar purchases. This strategic move is aimed at shoring up foreign reserves and meeting the stringent conditions set by the IMF. The international financial body’s scrutiny of Pakistan’s economic performance adds an additional layer of complexity to the situation, as the country endeavors to fulfill outlined conditions for sustained financial support.
The central bank’s proactive approach to accumulate dollars is perceived as an effort to build a safety net against economic uncertainties. This strategy aligns with the broader goal of fulfilling the IMF’s prerequisites for the release of funds. By actively bolstering reserves, the central bank aims to maintain stability and navigate the economic challenges posed by the dynamic global economic landscape.
As Pakistan faces economic headwinds, the government and financial institutions are under increased pressure to implement policies that address the root causes of the rupee’s depreciation. The nation’s ability to navigate these challenges will not only determine its eligibility for the upcoming IMF tranche but will also play a crucial role in shaping the economic trajectory in the coming months. Market participants and policymakers will keenly observe developments to gauge the effectiveness of measures taken to stabilize the currency and foster economic resilience in the face of global uncertainties.
