Karachi, January 28, 2025 – The Pakistani rupee continued its downward trajectory on Tuesday, falling to PKR 278.93 against the US dollar in the interbank foreign exchange market.
This marked a loss of 10 paisas compared to the previous day’s closing of PKR 278.83. The rupee’s decline has now extended to a third consecutive day, highlighting the ongoing pressure on the currency.
Currency analysts have pointed to a surge in demand for the US dollar as one of the main drivers behind the rupee’s depreciation. Additionally, mounting pressures on Pakistan’s foreign exchange reserves have further exacerbated the situation, leading to greater volatility in the exchange rate. The State Bank of Pakistan (SBP) recently reported a significant decline in the country’s foreign exchange reserves, with a $262 million drop during the week ending January 17, 2025. This reduction brought total net reserves down from $16.451 billion to $16.189 billion. Analysts believe that the strain on reserves is contributing to the rupee’s weakness, as the demand for foreign currency remains high due to import-related transactions and corporate obligations.
Despite the short-term challenges faced by the rupee, there are reasons for cautious optimism regarding Pakistan’s economic prospects. The country has made notable strides in improving its balance of payments, with a current account surplus of $1.21 billion recorded for the first half of fiscal year 2024-25 (July-December 2024). This represents a significant turnaround from the $1.40 billion deficit seen in the same period last year, signaling progress in addressing Pakistan’s persistent structural economic challenges. Analysts believe this improvement will enhance investor confidence and contribute to a more stable economic environment in the coming months.
In addition, remittance inflows from overseas Pakistanis have been a crucial factor in supporting the country’s foreign exchange reserves. During the first half of FY2024-25, remittances surged by 38%, reaching a total of $17.85 billion, compared to $13.44 billion in the corresponding period of the previous year. These inflows not only help bolster reserves but also provide significant relief to the economy, especially amidst global economic uncertainties.
While the rupee remains under pressure in the short term, the positive developments in Pakistan’s external accounts and robust remittance growth are expected to provide a foundation for greater stability in the medium term, offering a more optimistic outlook for the country’s economic future.