Karachi, July 25, 2023: The Pakistani Rupee (PKR) has experienced its eighth consecutive loss against the US dollar on Tuesday, driven by an increase in demand for import payments.
The local currency ended at PKR 288.52 to the dollar, compared to the previous day’s closing rate of PKR 287.92 in the interbank foreign exchange market. The rupee’s losing streak began on July 14, and during the past eight sessions, it has lost a significant amount, totaling PKR 12.06.
A key factor contributing to the recent volatility in the currency exchange rate is the approval of a $3 billion Stand By Agreement (SBA) for Pakistan by the executive board of the International Monetary Fund (IMF). Under this agreement, Pakistan has already received the first tranche of $1.2 billion from the IMF, with the remaining funds expected to follow.
Despite the positive development of a substantial rise in Pakistan’s foreign exchange reserves, currently standing at $14.07 billion, the foreign exchange market has seemingly overlooked this growth. The impressive surge in foreign exchange reserves is mainly attributed to significant inflows from the IMF and other friendly countries.
The State Bank of Pakistan (SBP) has reported a remarkable increase in foreign exchange reserves, with a growth of $4.227 billion in just one week. The reserves rose from $9.838 billion on July 7, 2023, to $14.07 billion by the end of the week on July 14, 2023.
Financial experts speculate that the decline in the Pakistani Rupee’s value may be influenced by the IMF’s demands for the country to adopt a more flexible exchange rate regime. Allowing market forces to determine the exchange rate has resulted in more pronounced fluctuations in the currency’s value.
Furthermore, the recent surge in dollar demand resulting from increased import payments could also be adding pressure on the exchange rate, exacerbating the rupee’s decline.
Economic authorities in Pakistan are closely monitoring the situation and plan to take necessary steps to stabilize the currency and promote economic growth amidst these challenging developments. However, it remains uncertain how long the rupee’s losing streak will persist and how the country will address the underlying economic factors affecting its currency’s value.
As the nation navigates through this period of financial turbulence, market participants and citizens alike are closely observing the currency’s performance and the government’s response in order to make informed financial decisions.