Karachi – October 31, 2023 – The US dollar continued its steady ascent against the Pakistani Rupee (PKR) for the seventh consecutive session, closing at PKR 281.47.
This persistent decline in the local currency has raised alarms among traders and analysts, as the PKR has depreciated by approximately PKR 2.68, marking a 0.96 percent decline since its last closing rate of PKR 278.79 on October 20, 2023.
On a daily basis, the PKR lost 52 paisas to the dollar when compared to the previous day’s interbank foreign exchange market closing rate of PKR 280.95, underscoring the heightened volatility in the currency market.
Financial experts and analysts point to multiple key factors contributing to the significant depreciation of the rupee:
Decreasing Foreign Exchange Reserves: A primary concern revolves around the dwindling foreign exchange reserves of Pakistan. By the week ending October 20, 2023, the country’s foreign exchange reserves had decreased by $257 million, reaching $12.656 billion. This was in stark contrast to the $12.913 billion figure of the previous week. The reduction in foreign exchange reserves directly impacts the nation’s capacity to maintain a stable currency value.
Declining SBP Reserves: The official foreign exchange reserves of the State Bank of Pakistan (SBP) also took a substantial hit, falling by $220 million to $7.494 billion by the week ending October 20, 2023, in comparison to $7.714 billion the previous week. A reduction in the central bank’s reserves can limit its ability to intervene in the foreign exchange market and support the PKR.
Increasing Demand for Imports: Another contributing factor to the rupee’s depreciation is the rising demand for imports. The recent economic recovery and an uptick in import activities have exerted significant pressure on the rupee. As businesses expand and the economy rebounds, the need for foreign currency to fund imports has surged, leading to heightened demand for the US dollar.
The continuous depreciation of the Pakistani Rupee against the US Dollar necessitates close monitoring by authorities and the development of strategies to stabilize the currency. A weaker currency can affect the cost of imports, inflation rates, and the overall economic health of the nation. For businesses engaged in international trade, fluctuations in exchange rates can significantly impact their profitability and competitiveness in the global market.
A pressing issue that needs to be addressed is the country’s balance of payments. A persistent trade deficit could further strain foreign exchange reserves and the overall financial stability of Pakistan. In response to these challenges, both the government and the central bank may need to consider implementing monetary and fiscal policies to address the situation.
It remains imperative that stakeholders, including the government, central bank, and market participants, closely collaborate to manage the situation and implement measures that safeguard the value of the rupee and promote financial stability. The ongoing depreciation of the PKR underscores the importance of a well-thought-out and proactive approach to managing Pakistan’s foreign exchange market.
Dollar Dominates Against Pakistani Rupee for Sixth Consecutive Session, Reaching PKR 280.95
