Karachi, May 7, 2025 – The Pakistani rupee continued its downward trajectory on Wednesday, depreciating further against the US dollar and closing at PKR 281.47 in the interbank foreign exchange market.
This marks a 10-paisa decline from the previous day’s closing rate of PKR 281.37.
The latest slide in the Pakistani rupee’s value has raised fresh concerns among market watchers, who attribute the depreciation to a mix of geopolitical and economic factors. Notably, the rupee’s weakening comes amid rising regional instability following recent Indian airstrikes in Pakistan, which have rattled investor confidence and heightened demand for safer assets like the dollar.
Adding to the pressure on the rupee are Pakistan’s dwindling foreign exchange reserves. According to the State Bank of Pakistan (SBP), the country’s reserves fell by $184 million during the week ending April 25, 2025, dropping to $15.252 billion from $15.436 billion the previous week. This persistent decline in reserves underscores the fragility of the external sector and has limited the central bank’s ability to defend the rupee.
Moreover, the expanding trade deficit is putting further strain on the Pakistani rupee. Data from the Pakistan Bureau of Statistics (PBS) revealed that the trade gap surged by 55% in April 2025 compared to April 2024. The deficit ballooned to $3.39 billion, a sharp increase from $2.18 billion a year earlier, marking the most severe monthly imbalance in three years. The growing trade gap has significantly boosted demand for dollars, particularly among importers and businesses settling foreign obligations, thereby adding downward pressure on the rupee.
Despite these challenges, some analysts are cautiously optimistic. They anticipate a possible short-term recovery in the Pakistani rupee, supported by expected inflows from overseas worker remittances and export proceeds. These sources of foreign currency could help ease dollar shortages in the interbank market and temporarily stabilize the rupee.
Nonetheless, the broader outlook for the Pakistani rupee remains fragile. Analysts warn that unless Pakistan strengthens its economic fundamentals—particularly by increasing foreign reserves and narrowing the trade deficit—the rupee is likely to remain under sustained pressure in the face of external shocks and continued dollar demand.