The Pakistani Rupee (PKR) made a modest gain against the US dollar on Thursday, appreciating by two paisas to close at Rs174.87 in the interbank foreign exchange market, compared to the previous day’s closing rate of Rs174.89. Despite the high demand for import payments, positive market sentiment helped the rupee stabilize.
Currency experts attributed the rupee’s gain to several factors that have reduced pressure on the dollar. A key contributor has been the recent dip in international oil prices, which has helped ease concerns over Pakistan’s rising import bill. Declines in oil prices globally reduce Pakistan’s expenditure on oil imports, lessening the demand for dollars in the local market.
In addition, recent financial inflows have bolstered the country’s foreign reserves. Last week, Pakistan received the sixth tranche of funds from the International Monetary Fund (IMF) under the Extended Fund Facility (EFF). Additionally, proceeds from Sukuk bonds issued earlier have contributed to the foreign currency reserves, providing further support to the rupee.
The IMF funding and Sukuk proceeds have been crucial for Pakistan in managing its foreign exchange reserves amid economic challenges, including a rising import bill. During the first half of the 2021-2022 fiscal year (July to December), Pakistan’s oil import bill surged by 113.4 percent, reaching $10.18 billion compared to $4.77 billion in the same period last year. The substantial increase in oil imports has added pressure on the country’s currency, prompting concerns about the trade deficit and dollar outflows.
However, the experts cautioned that any future increases in global oil prices could negatively impact the rupee, as Pakistan’s economy is heavily reliant on imported energy. A hike in oil prices would likely lead to increased dollar demand, exerting downward pressure on the rupee once again.
For now, the rupee’s slight appreciation reflects a positive outlook driven by improved foreign exchange reserves and manageable oil prices. The current gains, though modest, bring some relief to the currency market, where volatility has been an ongoing challenge amid global economic fluctuations and local inflationary pressures.
With inflation on the rise and international oil prices still susceptible to fluctuation, maintaining stability in the foreign exchange market will require careful management of foreign reserves and a focus on securing further inflows.
