Pakistani Rupee Gains 6 Paisas to Dollar Amid Trade Deficit Dip

Pakistani Rupee Gains 6 Paisas to Dollar Amid Trade Deficit Dip — The Pakistani rupee appreciated by 6 paisas against the US dollar on Tuesday, driven by a narrowing trade deficit, according to data released by the State Bank of Pakistan (SBP).

The rupee ended the day at PKR 278.30 against the dollar, improving from the previous day’s closing rate of PKR 278.36 in the interbank foreign exchange market.

Currency analysts credited this slight gain to a significant reduction in the country’s trade deficit. The deficit shrank by 15.25 percent, reaching $21.73 billion compared to $25.64 billion during the corresponding period of the previous fiscal year. From July to May of the fiscal year 2023-24, exports grew by 10.64 percent, totaling $28.07 billion, up from $25.37 billion in the same period last fiscal year. In contrast, imports declined by 2.37 percent, falling to $49.80 billion from $51 billion during the first 11 months of the current fiscal year.

The improved trade balance has instilled a sense of optimism among market analysts, who predict that the rupee will remain stable in the near future. Exchange rates are expected to maintain a range-bound pattern, particularly as the market anticipates the presentation of the budget for the fiscal year 2024-25, scheduled for later this month.

Despite the positive trend in the trade balance, analysts have expressed concerns over the country’s dwindling foreign exchange reserves. According to the latest SBP report, Pakistan’s foreign exchange reserves decreased by $270 million in the week ending May 24, 2024, bringing the total down to $14.315 billion from $14.585 billion the previous week. The central bank’s own reserves fell by $63 million, from $9.157 billion to $9.094 billion, primarily due to external payments made by Pakistan.

The persistent decline in foreign exchange reserves poses a challenge for the country’s economic stability. Analysts stress the importance of strategic economic measures and prudent financial management to sustain the recent gains in the rupee’s value and to address the broader concerns regarding the reserves.

As Pakistan prepares for the upcoming budget announcement, market participants remain watchful, hoping for policies that will bolster economic resilience and further stabilize the national currency.