Karachi, August 26, 2024 – The Pakistani rupee appreciated on Monday, rising to PKR 278.42 against the US dollar, supported by improved foreign inflows and positive economic indicators. This marks a gain of 8 paisas from last Friday’s closing rate of PKR 278.50 in the interbank foreign exchange market.
Currency analysts attribute the rupee’s appreciation to an uptick in Pakistan’s foreign exchange reserves and a reduction in the current account deficit. The strengthening of the rupee reflects a steady flow of foreign exchange into the country, which has bolstered market confidence and stabilized the currency.
The State Bank of Pakistan (SBP) reported a slight increase in foreign exchange reserves, which stood at $14.67 billion as of August 16, 2024. This marks a modest rise of $22 million from the previous week’s reserves, which were at $14.645 billion on August 9, 2024. Analysts highlighted that the increase in reserves was driven by improved export receipts and stronger remittances from overseas Pakistanis. These inflows have played a crucial role in strengthening the balance of payments, providing much-needed support to the rupee.
Breaking down the figures, the SBP’s own foreign exchange reserves saw a rise of $19 million, bringing the total to $9.292 billion as of August 16, 2024. This is up from $9.273 billion recorded the previous week. Meanwhile, reserves held by commercial banks also experienced marginal growth, increasing by $3 million to end the week at $5.375 billion, compared to $5.372 billion a week earlier.
The appreciation of the rupee comes as a relief for Pakistan’s economy, which has been grappling with high inflation and external pressures. A stronger rupee helps to ease inflationary pressures by reducing the cost of imported goods, which is particularly important for a country that relies heavily on imports for energy and other essential commodities. Additionally, it signals increased investor confidence and a more stable economic environment, which could attract further foreign investments.
Currency experts also noted that the reduction in the current account deficit has been a positive development for the rupee. The narrowing of the deficit indicates that Pakistan is successfully managing its foreign exchange outflows, which has been a key concern for policymakers. The combination of improved reserves and a lower current account deficit has created a more favorable outlook for the rupee in the near term.
Looking ahead, analysts suggest that continued vigilance in managing external accounts and sustaining foreign inflows will be critical for maintaining the rupee’s stability. As the government implements reforms and seeks to enhance exports and remittances, the rupee is expected to remain on a steady path, provided that global economic conditions remain supportive.
