Karachi, September 19, 2024 – The Pakistani Rupee (PKR) showed a positive trend on Thursday, appreciating to PKR 277.91 against the US dollar. This rise comes as a result of the significant contraction in Pakistan’s Current Account Deficit (CAD) during the first two months of the fiscal year 2024-25.
The rupee strengthened by 13 paisas compared to the previous day’s closing rate of PKR 278.04 in the interbank foreign exchange market. Currency analysts have attributed this recent appreciation to a combination of factors, notably the shrinking CAD and an overall improvement in market sentiment.
The State Bank of Pakistan (SBP) released a report highlighting a sharp 81% contraction in the CAD for the period between July and August 2024. The deficit narrowed down to $171 million, a substantial drop from $893 million recorded during the same period of the previous fiscal year.
Analysts point to this data as one of the key drivers behind the rupee’s appreciation. The significant reduction in the CAD suggests an easing of external financial pressures, leading to increased investor confidence in the rupee’s strength. “The shrinking CAD has been a major positive factor for the rupee’s performance. It reflects a healthier balance of payments position and contributes to greater stability in the currency,” noted a currency expert.
In addition to the contraction in the CAD, there is growing optimism surrounding Pakistan’s potential loan approval from the International Monetary Fund (IMF). The IMF is expected to review Pakistan’s loan program on September 25, 2024. Market participants are hopeful that the review will result in the approval of a $7 billion bailout package aimed at stabilizing Pakistan’s struggling economy.
“The anticipation of the IMF loan approval has been a key factor in the rupee’s recent performance,” said a senior currency trader in Karachi. “Investors are optimistic that the funds will help stabilize the economy and reduce pressure on foreign exchange reserves.”
The approval of this loan would not only provide immediate financial relief but would also boost market confidence, allowing for better management of foreign exchange reserves and reducing pressure on the rupee in the longer term. For now, the combination of a shrinking CAD and the IMF’s impending decision are setting the stage for the rupee’s continued stability in the near future.
