Karachi, January 3, 2025 – The Pakistani rupee gained 8 paisas against the US dollar in the interbank foreign exchange market on Friday, closing at PKR 278.56 to the dollar.
This recovery followed a period of intense pressure on the rupee due to heightened demand for foreign currency to meet import and corporate payment obligations.
The improvement in the rupee’s value was largely attributed to a reduction in the demand for dollars, which had been exacerbated by the rising needs for import payments. In contrast to recent trends, where demand for the greenback had led to a depreciation of the rupee, Friday’s recovery was seen as a sign of stability, driven by decreased import activity and corporate requirements for dollar-denominated transactions.
Earlier in the week, the rupee had faced significant strain due to rising import costs, particularly after the Pakistan Bureau of Statistics (PBS) released data indicating a 17.44% rise in the country’s import bill. Imports in December 2024 surged to $5.29 billion, up from $4.50 billion in November 2024. This increase in imports put additional pressure on the foreign exchange market, causing a surge in demand for dollars and weakening the rupee.
Despite the strain on the rupee, there were several positive developments in Pakistan’s external sector. The country’s foreign exchange reserves recorded a dip, with a decrease of $262 million over the course of a week. As of December 20, 2024, reserves stood at $16.371 billion, down from $16.633 billion on December 13, 2024. Lower reserves could make it more difficult for the central bank to stabilize the currency in the short term. However, there were still positive signs of recovery in the external sector.
Notably, between July and November 2024, Pakistan registered a current account surplus of $944 million, a significant shift from the $1.68 billion deficit recorded during the same period in 2023. This improvement signals a positive adjustment in Pakistan’s economic balance and has contributed to strengthening the rupee. Moreover, remittances from overseas Pakistanis surged by 34%, totaling $14.77 billion in the first five months of the fiscal year 2024-25, compared to $11.05 billion in the previous year. These remittance inflows have provided vital support to the country’s liquidity, easing external financial pressures and bolstering confidence in the domestic currency.