Karachi, June 21, 2023 – The Pakistani Rupee (PKR) showed a positive trend as it gained 24 paisas against the US dollar on Wednesday, closing at PKR 286.98 in the interbank foreign exchange market, compared to the previous day’s closing of PKR 287.22.
READ MORE: Pakistani Rupee Gains Slightly Against Dollar as Current Account Deficit Narrows
Currency experts attribute the rupee’s appreciation to cautious importers who refrained from placing fresh orders, leading to reduced demand for the dollar. They also mentioned that authorities are taking measures to prevent dollar outflows in order to further reduce the current account deficit.
Pakistan has made significant progress in reducing its current account deficit during the first eleven months (July-May) of the fiscal year 2022-23. Data released by the State Bank of Pakistan (SBP) indicates an 81 percent decrease in the deficit, which stood at $2.94 billion, compared to the $15.16 billion deficit recorded in the same period last year.
READ MORE: Pakistani Rupee Declines Against US Dollar Due to High Demand at Week’s Start
Despite this positive development, analysts raise concerns about the Pakistani Rupee’s vulnerability due to limited inflows and delays in securing a loan program from the International Monetary Fund (IMF). The failure to secure a tranche of over a billion dollars under the IMF program has added to the challenges faced by the local currency.
Furthermore, there is growing worry among analysts regarding the decline in foreign exchange reserves, which poses a potential threat to the stability of the Pakistani Rupee. Recent data from the State Bank of Pakistan (SBP) reveals that the official foreign exchange reserves have fallen below the recommended one-month import cover level. As of the week ending June 2, 2023, the reserves decreased by $179 million to $3.912 billion, compared to $4.091 billion in the previous week (May 26, 2023).
READ MORE: PKR Goes Up 18 Paisas Against Dollar at Interbank Closing
In May 2023, Pakistan witnessed a substantial increase of 43 percent in its import bill, reaching $4.275 billion compared to $3 billion in April 2023. This surge can be attributed to the government’s decision to lift restrictions on opening Letters of Credit (LCs) for import payments. International standards recommend maintaining foreign exchange reserves equivalent to at least three months’ worth of import cover, highlighting the urgency of addressing the situation.
READ MORE: Pakistani Rupee Slips Against Dollar to End at PKR 287.37 in Interbank
The Pakistani Rupee has faced significant pressure recently due to limited inflows and a challenging political climate. On May 11, 2023, the rupee reached a record low of PKR 298.93 against the US dollar, raising concerns among investors and undermining confidence in the local currency.
