Karachi, January 2, 2024 – The Pakistan Rupee (PKR) experienced a marginal easing of PKR 0.03 against the US dollar as the market reopened after the holiday period.
The rupee closed at PKR 281.89 to the dollar, slightly down from the previous Friday’s closing rate of PKR 281.86 in the interbank foreign exchange market.
Currency analysts attribute this minor adjustment to the reopening of the market after the weekly holidays and a bank holiday, which typically leads to increased demand for the US dollar. However, they express optimism about the stability of the local currency against the greenback in the coming days.
Market analysts point to the surge in foreign exchange reserves as a significant factor contributing to the rupee’s stability. The State Bank of Pakistan (SBP) reported a substantial increase of $852 million in its official foreign exchange reserves for the week ending December 22, 2023. This boost elevated the central bank’s reserves from $6.905 billion to $7.757 billion, marking a positive turn in Pakistan’s economic landscape.
The SBP attributes this notable increase to substantial foreign inflows received by the government of Pakistan. Economists view this development optimistically, stating that it will play a crucial role in managing the country’s balance of payments and enhancing its external debt repayment capacity.
The overall foreign exchange reserves for Pakistan, including both central bank and commercial bank holdings, experienced a combined boost of $788 million. By the week ending December 22, 2023, the total reserves reached $12.856 billion, compared to the previous week’s level of $12.068 billion. This surge is seen as a positive development that could help allay concerns about the country’s economic stability.
A key contributor to the Rupee’s stability is the significant reduction in the Current Account Deficit (CAD). From July to November of the fiscal year 2023-24, Pakistan witnessed a substantial 64.46 percent reduction in its CAD, totaling $1.16 billion. This contrasts sharply with the $3.26 billion recorded during the same period in the previous fiscal year. Analysts attribute this decline to a significant reduction in the trade deficit, signaling positive trends in the country’s economic performance.
While challenges persist, such as increased demand for the US dollar, the Rupee’s ability to gain ground against the dollar underscores the intricate interplay of economic factors. The positive trajectory in foreign exchange reserves and the reduction in the CAD position Pakistan favorably as it moves into the new year, instilling confidence in the economic outlook and stability of the national currency. Investors and analysts will continue to monitor these trends closely as they shape the economic landscape in the coming months.
