Karachi, October 15, 2023 – The Pakistani Rupee (PKR) is poised to extend its recent gains against the US dollar in the upcoming week starting October 16, 2023.
Analysts believe that several factors, including a boost in foreign currency exchange and the government’s strict measures against smuggling and hoarding, will contribute to the rupee’s positive momentum.
READ MORE: Dollar Weakens for 27th Straight Session in Pakistan to End at PKR 277.62
The PKR concluded trading at 281.65 to the dollar in the interbank market on Monday. However, it steadily appreciated and reached 277.62 per dollar by the end of the week. Over the course of the previous five sessions, the rupee saw a notable 1.43 percent rise.
In a controlled environment, it is anticipated that this appreciation trend will persist for a few more days. Nevertheless, the sustainability of this upward trajectory hinges on the upcoming IMF review and the institution’s stance on the rupee’s appreciation.
READ MORE: Pakistani Rupee Achieves 26-Session Winning Streak, Ends at PKR 278.58 Against the Dollar
The International Monetary Fund (IMF) is scheduled to review Pakistan’s ongoing $3 billion loan program next month. In July, Pakistan received $1.2 billion from the IMF, with an additional $700 million expected upon the completion of the first review and the release of the second tranche by December.
The overall recovery of the currency is remarkable, with the rupee gaining 10.62 percent, equivalent to 29.48 rupees against the dollar, in the interbank market over the last 27 working days. It’s worth noting that the rupee had hit a record low of 307.10 per dollar on September 5.
READ MORE: Rupee Remains Unbeatable Against Dollar for 25th Straight Session; Ends at PKR 279.51
The recent statements from Pakistan’s central bank governor have provided a boost of confidence in the rupee’s sustained rally. The State Bank of Pakistan (SBP) has reportedly met several end-of-September targets agreed upon with the IMF and is well-positioned to fulfill the remaining requirements. This development bodes well for the impending IMF review, suggesting that Pakistan may smoothly pass the first assessment of the stand-by arrangement.
Governor Jameel Ahmad of SBP disclosed to key foreign investors during IMF and World Bank meetings in Morocco that the country’s foreign exchange reserves have improved substantially. These improvements result from a buildup in reserves and a reduction in forward foreign exchange liabilities. The foreign exchange reserves have risen from a low of $3.1 billion in January 2023 to $7.6 billion as of the end of September 2023. Notably, this increase has been largely supported by non-debt-creating inflows facilitated by favorable market conditions.
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Furthermore, Governor Ahmad confirmed that the SBP has significantly reduced forward foreign exchange liabilities and has exceeded the forward book target of $4.2 billion for end-September 2023, as agreed with the IMF.
However, analysts and traders warn that if the USD/PKR exchange rate falls below 275, it could disrupt the industry. Exporters may face challenges in exporting their products, while importers would receive an unreasonable subsidy. As a result, experts anticipate that the rupee’s ascent may slow down in the coming days.
In summary, the Pakistani Rupee’s recent gains against the US dollar appear to be underpinned by a combination of factors, including improving foreign exchange reserves and the government’s measures against illegal financial activities. While the momentum is positive, it will be closely monitored as the country approaches an important IMF review, which could influence the rupee’s future trajectory.