The Pakistani Rupee experienced a slight setback on Thursday, depreciating by 19 paisas against the US dollar in the interbank foreign exchange market.
The rupee closed at PKR 279.15 against the dollar, down from PKR 278.96 on Tuesday, February 4, 2025. The market was closed on Wednesday, February 5th, for a public holiday commemorating Kashmir Day. Currency analysts attribute this dip in the rupee’s value to increased dollar demand driven by import and corporate payments, particularly as the market reopened after the holiday. They suggest that the Pakistani Rupee was under pressure due to the accumulated demand.
Despite this recent fluctuation, there is optimism for the rupee’s stability in the near future, fueled by robust foreign inflows. A significant factor contributing to this positive outlook is the country’s impressive export growth. Data released by the Pakistan Bureau of Statistics (PBS) reveals a 10% surge in exports during the first seven months (July-January) of the fiscal year 2024-25. Exports reached $19.55 billion, a substantial increase from $17.78 billion during the corresponding period last year. This upward trend in exports is a promising sign for the economy and indirectly supports the Pakistani Rupee.
However, the Pakistani Rupee remains susceptible to pressures, particularly due to declining foreign exchange reserves. The State Bank of Pakistan (SBP) reported a $137 million decrease in reserves for the week ending January 24, 2025, bringing the total to $16.052 billion, down from $16.189 billion the previous week. This decline, primarily due to external debt repayments and other obligations, presents a continuing challenge to the Pakistani Rupee’s stability.
Amidst these challenges, there are encouraging signs on the horizon. Pakistan’s balance of payments is showing improvement. For the first half of FY 2024-25 (July-December 2024), the country recorded a current account surplus of $1.21 billion, a remarkable turnaround from the $1.40 billion deficit during the same period last year. This positive shift reflects ongoing economic adjustments that could bolster the Pakistani Rupee in the coming months.
Furthermore, remittances from overseas Pakistanis are playing a vital role in strengthening the Pakistani Rupee. These inflows have witnessed a remarkable 38% increase in the first half of FY 2024-25, reaching $17.85 billion compared to $13.44 billion in the same period the previous year. This surge in remittances provides crucial support to the nation’s foreign exchange reserves, acting as a buffer against external financial pressures that could otherwise weaken the Pakistani Rupee.