KARACHI: The US dollar continued its upward trajectory in the interbank foreign exchange market on Friday, closing at Rs174. This marks a slight depreciation of the Pakistani rupee, which lost four paisas compared to the previous day’s closing rate of Rs173.96.
Currency analysts attribute the rising demand for the dollar to the widening current account and trade deficits, coupled with a significant decline in the country’s foreign exchange reserves. The persistent pressure on the rupee has been further exacerbated by Pakistan’s external debt obligations and repayment commitments.
The State Bank of Pakistan (SBP) reported a substantial decline of $1.646 billion in its official foreign exchange reserves, which stood at $17.492 billion by the week ending October 15, 2021. This is a notable drop from the $19.138 billion recorded a week earlier on October 8, 2021. According to the SBP, a major factor contributing to this decrease was the external debt repayment, including the settlement of $1 billion related to Pakistan International Sukuk bonds.
The rising dollar value has also been fueled by Pakistan’s ballooning current account deficit. Data released by the SBP reveals that the deficit surged to $3.4 billion during the first quarter of the fiscal year (July – September 2021), in stark contrast to a surplus of $865 million recorded in the corresponding period of the previous fiscal year. This widening gap has intensified pressure on the rupee, making it increasingly vulnerable to fluctuations in the forex market.
Since the beginning of the current fiscal year, the rupee has been on a consistent downward trend. When compared to the exchange rate on June 30, 2021, which stood at Rs157.54 per dollar, the local currency has depreciated by Rs16.47, representing a sharp decline of 10.45 percent. The dollar’s relentless rise against the rupee underscores the country’s ongoing economic challenges and the need for prudent fiscal policies to stabilize the exchange rate.
With persistent demand for the dollar and mounting external liabilities, the rupee remains under pressure, and market watchers anticipate continued volatility in the currency market in the coming weeks.