Karachi, February 16, 2025 – The Pakistani rupee is projected to maintain a largely stable position against the US dollar during the upcoming week starting February 17, 2025.
The rupee is anticipated to stay within a narrow range despite the recent decline in foreign exchange reserves and the scheduled meetings between International Monetary Fund (IMF) officials and Pakistani authorities. These discussions will focus on climate resilience funding and the ongoing $7 billion bailout program.
Throughout the current week, the rupee traded steadily in the interbank market, fluctuating slightly between 279.20 and 279.26 against the dollar. The currency’s stability, despite external pressures, has provided a sense of cautious optimism in the financial markets.
The persistent decline in foreign exchange reserves and concerns regarding the IMF’s stance have raised apprehensions among traders, who remain wary of potential rupee depreciation. Market participants have observed firming premiums, with one- and three-month forwards trading at 150 and 340 paisa, respectively. However, exporters have been reluctant to engage in forward selling, contributing to the rupee’s current stability.
The upcoming weeks are deemed crucial for Pakistan’s economic outlook. A successful IMF review could unlock new financial inflows, bolstering the rupee and potentially leading to a favorable reassessment of the country’s risk profile. The ongoing negotiations aim to evaluate the $7 billion Extended Fund Facility (EFF) and explore the possibility of an additional $1 billion in climate resilience funding.
The rupee has demonstrated resilience in recent months, with inflation dipping to a nine-year low of 2.4 percent and remittances rising to $3 billion in January 2025. The influx of remittances is expected to increase further during the month of Ramadan, providing additional support to the rupee.
Pakistan’s exports have shown consistent strength, contributing to a fourth consecutive current account surplus. However, the pressure on the rupee persists as foreign exchange reserves have declined to $11.17 billion. The State Bank of Pakistan has made concerted efforts to stabilize reserves through strategic market purchases.
Market analysts suggest that the central bank may implement another 100 basis points rate cut in the next monetary policy statement before entering a prolonged pause. With improved inflows and a marginal current account surplus, it is unlikely that the IMF will advocate for rupee depreciation in the near term.
As the rupee remains stable, economic observers remain vigilant about the outcomes of the IMF meetings, which will play a significant role in shaping Pakistan’s economic trajectory and the future performance of the rupee.