Karachi, January 15, 2025 – The Pakistani rupee witnessed a slight decline of 5 paisas against the US dollar on Wednesday, primarily due to persistent demand for dollars driven by import and corporate payment obligations. The rupee closed at PKR 278.77 to the dollar, compared to the previous day’s closing of PKR 278.72 in the interbank foreign exchange market.
Currency analysts have pointed to heightened demand for the dollar as a major factor behind the rupee’s weakening. Despite periodic relief from remittance inflows, the rupee remains under pressure due to dwindling foreign exchange reserves, a situation that reflects broader economic challenges facing the country.
The State Bank of Pakistan (SBP) reported a $31 million decline in foreign exchange reserves for the week ending January 3, 2025. The total reserves now stand at $16.378 billion, down from $16.409 billion in the previous week. This steady reduction in reserves has exacerbated the rupee’s vulnerability, underscoring the urgent need for fiscal and monetary policy reforms to stabilize the currency and bolster economic resilience.
Remittance inflows, however, continue to act as a critical buffer against the rupee’s depreciation. During the first half of FY2024-25 (July–December), remittances from overseas Pakistanis surged to $17.85 billion, marking a 38% year-on-year increase from $13.44 billion in the same period last year. This substantial growth demonstrates the vital role of the Pakistani diaspora in providing financial support to the nation’s economy, helping to partially offset the impact of declining reserves.
Nonetheless, the rising import bill remains a significant challenge for the rupee. The Pakistan Bureau of Statistics (PBS) reported a 17.44% increase in imports for December 2024, with the monthly import bill climbing to $5.29 billion compared to $4.50 billion in November. This surge in dollar demand to meet import needs has further eroded the rupee’s value, amplifying concerns over economic stability.
Looking ahead, the interplay between remittance inflows, shrinking reserves, and mounting import payments will be pivotal in determining the rupee’s trajectory. Policymakers face the pressing task of implementing robust strategies to enhance foreign exchange reserves, reduce import dependency, and stabilize the currency. Achieving sustainable economic stability will demand coordinated efforts to address these persistent financial challenges effectively.