Karachi, November 07, 2023 – The Pakistani Rupee (PKR) extended its losing streak, recording its 12th consecutive decline to close at PKR 286.39 against the US dollar on Tuesday.
Over the course of these twelve sessions, the rupee has faced a notable drop of PKR 7.60, amounting to a substantial 2.72 percent decrease from its October 20, 2023 closing rate of PKR 278.79. This persistent slide of the rupee has sparked concerns among financial experts, and several contributing factors have been identified.
On a daily basis, the rupee inched down by PKR 1.10 compared to the previous day’s closing rate of PKR 285.29 in the interbank foreign exchange market.
A pivotal factor driving this rupee’s devaluation is the dwindling foreign exchange reserves of Pakistan. According to a State Bank of Pakistan (SBP) report, the country’s foreign exchange reserves plummeted by $78 million within a week, culminating at $12.577 billion by the week ending October 27, 2023, a significant decline from the prior week’s $12.655 billion ending on October 20, 2023.
This stands in stark contrast to the peak foreign exchange reserves witnessed in August 2021, which stood at a robust $27.2 billion.
Another substantial contributor to the rupee’s depreciation is the soaring demand for imports. The recent economic recovery and heightened import activities have exerted substantial pressure on the rupee. As businesses expand, and the economy rebounds, the necessity for foreign currency to fund imports has surged, leading to an increased demand for the US dollar.
The ongoing depreciation of the Pakistani Rupee against the US Dollar necessitates vigilant oversight and the formulation of strategies to stabilize the currency. A weaker currency can have far-reaching consequences, impacting import costs, inflation rates, and the overall economic health of the nation. For businesses engaged in international trade, fluctuations in exchange rates can significantly influence their profitability and global competitiveness.
A pressing issue that demands attention is Pakistan’s balance of payments. A persistent trade deficit could further strain foreign exchange reserves and the overall financial stability of Pakistan. To address these challenges, both the government and the central bank may need to consider implementing monetary and fiscal policies.
In summary, the continual depreciation of the Pakistani Rupee against the US Dollar highlights the need to address the root causes of this decline, including foreign exchange reserves, trade balance, and increased import demand.
To ensure economic stability, a coordinated effort is essential to implement effective policies and strategies that strengthen the currency and uphold Pakistan’s overall financial well-being.
Collaborative efforts among government authorities, the central bank, and market participants are vital to navigate this situation and implement measures that safeguard the rupee’s value while promoting financial stability.
READ MORE: Pakistani Rupee’s 11th Straight Decline Hits PKR 285.29 Against US Dollar
