KARACHI: The Pakistani Rupee (PKR) extended its gains against the US Dollar in early trading on Friday, buoyed by a significant reduction in the country’s current account deficit, according to currency dealers.
As of this morning, the US Dollar is being traded at Rs138.60 in the interbank foreign exchange market, reflecting a slight improvement from the previous day’s closing rate of Rs138.63. The recent appreciation of the rupee is attributed to positive economic indicators, particularly the contraction in the current account deficit.
The State Bank of Pakistan (SBP) released data on Thursday showing that Pakistan’s current account deficit had narrowed by 16.8 percent to $8.424 billion during the first seven months of the fiscal year 2018/2019. This compares favorably with the deficit of $10.124 billion recorded in the corresponding period of the previous fiscal year. The improvement in the current account balance is mainly due to a decline in imports coupled with an increase in foreign remittances.
Economists suggest that the reduction in the current account deficit is a positive sign for Pakistan’s economy, indicating improved fiscal management and a more balanced trade environment. The narrowing deficit alleviates some pressure on the rupee, contributing to its recent gains against the USD.
A significant factor behind the reduction in the current account deficit is the government’s measures to curb non-essential imports. The authorities have implemented various policies to restrict luxury goods and non-essential items, thereby reducing the overall import bill. Furthermore, the government has been actively promoting exports and facilitating better trade terms, which have positively impacted the trade balance.
Additionally, foreign remittances have shown a steady increase, providing much-needed support to the country’s foreign exchange reserves. The Pakistani diaspora has continued to send substantial funds back home, which has helped bridge the gap in the current account. The government’s efforts to streamline the remittance process and offer incentives for overseas Pakistanis have also contributed to this upward trend.
Market analysts believe that if the current trends persist, the PKR may see further stability and possibly more gains against the USD. However, they also caution that maintaining this trajectory will require sustained economic reforms and vigilant fiscal policies.
In conclusion, the appreciation of the Pakistani Rupee against the US Dollar in early trade today reflects a broader trend of economic improvement, driven by a significant reduction in the current account deficit. The measures taken by the government to control imports and boost remittances have started to yield positive results, fostering a more stable and resilient economic environment. The continued focus on economic reforms will be crucial in ensuring that these gains are sustained over the long term.