Karachi, January 29, 2025 – The Pakistani rupee managed to recover 6 paisas against the US dollar on Wednesday, ending at PKR 278.87 in the interbank foreign exchange market, after experiencing a decline for three consecutive sessions. The previous day’s closing stood at PKR 278.93, marking a modest recovery.
Currency market experts have attributed this slight rebound in the rupee’s value to improved foreign inflows, which provided some relief to the local currency. However, they cautioned that the pressure from ongoing import payments continues to weigh heavily on the rupee, limiting its ability to sustain gains.
In recent days, the rupee has faced significant depreciation due to a combination of factors. A key challenge has been the growing pressures on Pakistan’s foreign exchange reserves, which have led to increased volatility in the exchange rate. According to the State Bank of Pakistan (SBP), the country’s foreign exchange reserves experienced a notable decline of $262 million during the week ending January 17, 2025. This reduction brought total net reserves down from $16.451 billion to $16.189 billion. Analysts point to this drop in reserves as a critical factor contributing to the rupee’s weakness, as the demand for foreign currency remains high to meet import payments and corporate obligations.
Despite these short-term challenges, there are reasons for cautious optimism about Pakistan’s economic outlook. One key positive development has been the improvement in the country’s balance of payments. For the first half of the fiscal year 2024-25 (July-December 2024), Pakistan recorded a current account surplus of $1.21 billion, a notable turnaround from the $1.40 billion deficit recorded in the same period the previous year. This improvement signals progress in addressing Pakistan’s long-standing structural economic issues and may help foster greater investor confidence in the future.
Moreover, remittance inflows from overseas Pakistanis have played a crucial role in supporting the country’s foreign exchange reserves. During the first half of FY2024-25, remittances surged by 38%, totaling $17.85 billion compared to $13.44 billion in the same period of the previous year. These remittances provide much-needed relief to Pakistan’s economy, especially in the face of global economic uncertainties and domestic financial pressures, contributing to a more stable outlook for the rupee in the long term.