Karachi, January 7, 2025 – The Pakistani rupee weakened further on Tuesday, closing at PKR 278.67 against the US dollar in the interbank foreign exchange market. This slight depreciation is primarily linked to heightened demand for dollars, driven by increasing import payments.
Currency analysts have highlighted that the rupee’s downward movement reflects the growing pressure from Pakistan’s elevated import bill. Data from the Pakistan Bureau of Statistics (PBS) revealed a 17.44% surge in imports, with the total import bill rising to $5.29 billion in December 2024, up from $4.50 billion in November 2024. This substantial increase has escalated the demand for dollars, putting additional strain on the rupee.
Moreover, the depreciation of the rupee has been exacerbated by a decline in the country’s foreign exchange reserves. As of December 20, 2024, Pakistan’s reserves dropped by $262 million, falling from $16.633 billion to $16.371 billion. This reduction limits the State Bank of Pakistan’s capacity to intervene and stabilize the rupee, further contributing to its volatility.
Despite these challenges, positive developments may help ease pressure on the rupee in the coming days. Reports indicate that the United Arab Emirates (UAE) has agreed to roll over $2 billion in loans, a move expected to bolster market confidence and provide support to the domestic currency.
Encouragingly, Pakistan’s current account balance has shown significant improvement. Between July and November 2024, the country recorded a surplus of $944 million, a stark contrast to the $1.68 billion deficit during the same period in 2023. This adjustment in the external account reflects improved fiscal management and offers a degree of stability to the rupee.
Additionally, remittances from overseas Pakistanis have surged by 34%, reaching $14.77 billion during the first five months of the fiscal year 2024-25, compared to $11.05 billion in the corresponding period of the previous year. This inflow of foreign currency has helped alleviate some of the external financial pressures, boosting liquidity and contributing positively to the rupee’s outlook.
While the rupee faces immediate challenges due to increased dollar demand and declining reserves, the anticipated rollover of UAE loans and improved current account metrics may provide much-needed stability in the medium term.