Karachi, February 23, 2025 – The Pakistani rupee is expected to gain some strength in the coming week, primarily due to foreign inflows linked to Ramadan, according to financial experts.
These inflows, including remittances from overseas Pakistanis, traditionally increase ahead of the holy month, providing support to the local currency.
This past week, the rupee witnessed slight depreciation in the interbank market, closing at 279.27 against the US dollar on Monday and further weakening to 279.57 by Friday. Analysts predict that the rupee will hover just under 280 per dollar in the upcoming week, with Ramadan-related inflows offering a much-needed boost.
A report by Tresmark highlighted that while regional currency depreciation, such as the Indian rupee, Turkish lira, and Bangladeshi taka, along with concerns over new tariff structures, pose challenges, the rupee is likely to experience a gradual depreciation of around 5-10 paisas per week. However, these declines may be offset by improved liquidity conditions in the market.
The report also noted that banks have been facing a shortfall in dollar liquidity over the last two weeks, resulting in delays in even small-scale imports. Under normal circumstances, such conditions would put additional pressure on the rupee, but the market has continued to show consistent buying interest at lower levels, helping maintain stable forward premiums for one-month and longer tenures.
Further data reveals that the State Bank of Pakistan (SBP)’s short swap book has dipped below $3 billion as of December 2024, reinforcing the trend of buying at dips to support the rupee. Meanwhile, Pakistan’s current account balance slipped into a deficit of $420 million in January, reversing from a $474 million surplus in December. This shift was attributed to higher imports of goods and a drop in services exports, exacerbating the trade imbalance.
As of February 14, Pakistan’s foreign exchange reserves held by the SBP stand at $11.2 billion, enough to cover just over two months of imports. However, upcoming International Monetary Fund (IMF) disbursements are expected to help stabilize the rupee by boosting foreign exchange reserves.
An IMF mission is set to visit Islamabad from February 24 to 28 to discuss $1 billion in climate financing for Pakistan, provided under the IMF’s Resilience and Sustainability Trust. Additionally, a mid-March review of Pakistan’s $7 billion loan program could unlock another $1 billion tranche, providing further relief to the rupee and supporting economic stability.