Karachi, February 26, 2024 – The US Dollar witnessed a decline against the Pakistani Rupee (PKR) by 0.16 at the interbank closing on Monday, attributed to recent relaxations granted to exporters in the utilization of foreign exchange.
The exchange rate showed a decrease in dollar value from last Friday’s closing of PKR 279.36 in the interbank foreign exchange market.
Currency analysts pointed to the recent relaxation measures implemented by the State Bank of Pakistan (SBP) as a key driver behind the gain in rupee value. The central bank, as part of its ease of doing business initiatives, announced amendments to regulations, allowing exporters greater flexibility in using funds held in Exporters’ Special Foreign Currency Accounts (ESFCAs) without prior SBP approval.
Under the revised guidelines, exporters can now freely use funds from ESFCAs for various international transactions related to the operational needs of their businesses. This includes payments for imports, addressing shortfalls or non-realization of export proceeds due to genuine reasons, payments for services or IT/digital services from abroad, dividends of domestic entities to shareholders abroad, and operational expenses for liaison/marketing/representative offices abroad.
While the move has provided relief to exporters and contributed to the strengthening of the Pakistani Rupee, analysts cautioned that the rupee might face pressure in the coming days. This potential pressure is linked to a fall in foreign exchange reserves and increased demands for import payments.
Data for the week ending February 16, 2024, revealed a decline of $51 million in Pakistan’s foreign exchange reserves, recording $13.098 billion compared to $13.149 billion the previous week (February 9, 2024). Despite the dip, it is essential to note that the current reserves, while lower than the robust levels observed in August 2021, still form a substantial buffer.
The decreasing foreign exchange reserves indicate the challenges Pakistan faces in managing external finances and meeting import obligations. Economic uncertainties, such as fluctuations in global commodity prices and geopolitical tensions, contribute to the pressure on the rupee. The rise in demand for the US dollar for import-related activities and corporate payments further highlights the delicate balance required to ensure currency stability.
As Pakistan navigates through economic challenges, the interplay between foreign exchange reserves, currency values, and policy measures will remain a focal point for analysts and policymakers alike. The recent positive impact of export-related relaxations on the rupee underlines the importance of strategic interventions to address economic challenges and promote stability in the currency market.
