The Pakistani Rupee (PKR) continued its downward trend against the US Dollar on Thursday, depreciating by 79 paisas in the interbank market. The rupee closed at Rs160.62 against the dollar, compared to the previous day’s rate of Rs159.83, as demand surged for import and corporate payments.
Currency dealers attributed the rupee’s decline to heightened demand for the dollar, driven primarily by importers and corporate entities needing to settle payments. Despite recent positive developments in Pakistan’s economic indicators, including a current account surplus and bolstered foreign exchange reserves, the local currency struggled to hold its ground against the greenback.
Earlier in the trading session, the rupee showed some resilience following reports of a current account surplus and an increase in the country’s foreign exchange reserves. However, the currency was unable to sustain its strength as the day progressed, leading to a notable depreciation by the market’s close.
The State Bank of Pakistan (SBP) reported that the country’s liquid foreign exchange reserves crossed the $20 billion mark by the week ending on November 13, 2020. The reserves increased by $178 million, bringing the total to $20.085 billion, up from $19.907 billion in the previous week. This rise in reserves was seen as a positive signal for the economy, reflecting increased inflows and a stable balance of payments.
In addition to the reserve growth, the balance of payments posted a current account surplus of $1.16 billion during the first four months of the current fiscal year (July–October 2020/2021). This was a significant turnaround from the same period last year, when the country recorded a current account deficit of $1.42 billion. The surplus was largely driven by a sharp decline in the trade deficit, improved remittances, and controlled expenditures.
Despite these encouraging signs, the rupee’s depreciation highlights the persistent pressures on the currency due to external payment obligations. Importers have ramped up demand for the dollar as they look to secure foreign currency for future payments, especially amid fluctuating global market conditions. Corporate entities are also contributing to this demand as they settle international transactions and manage their foreign currency exposures.
The ongoing depreciation of the rupee poses challenges for the economy, particularly in managing inflationary pressures and maintaining external stability. Analysts suggest that while the improved foreign exchange reserves and current account surplus provide a cushion, sustained demand for the dollar could keep the rupee under pressure in the near term. The SBP’s management of the exchange rate and monetary policy will be crucial in navigating these challenges as the fiscal year progresses.
