Karachi, December 20, 2024 – The Pakistani rupee registered a slight decline of 7 paisas against the US dollar on Friday, closing at PKR 278.42 in the interbank foreign exchange market, down from the previous day’s rate of PKR 278.35. This decline occurred despite an increase in the country’s foreign exchange (forex) reserves.
Currency experts attributed the rupee’s depreciation to heightened year-end dollar demand for import and corporate payments. The State Bank of Pakistan (SBP) recently announced that total liquid forex reserves rose to $16.633 billion as of December 13, 2024, reflecting a modest increase of $32 million compared to $16.601 billion recorded the previous week. The central bank’s reserves alone reached $12.082 billion, indicating improved inflows and better external resource management. However, this figure still trails the previous week’s reserves of $12.51 billion, signaling a gradual recovery rather than a substantial improvement.
Despite the slight weakening of the rupee, analysts remain cautiously optimistic about its medium-term stability. Their optimism is bolstered by a notable improvement in Pakistan’s external sector indicators. For the first time in years, the country has reported a significant current account surplus of $944 million during the first five months of the fiscal year 2024-25 (July to November). This marks a dramatic turnaround from the $1.68 billion deficit recorded during the same period last year, underscoring improved economic fundamentals.
Another positive factor supporting the rupee is the robust growth in remittances from overseas Pakistanis. Between July and November 2024, remittances surged by an impressive 34% year-on-year, totaling $14.77 billion compared to $11.05 billion in the corresponding period last year. This influx of foreign currency has alleviated external financial pressures, bolstered domestic liquidity, and provided crucial support to the rupee.
In conclusion, while seasonal dollar demand has momentarily pressured the rupee, Pakistan’s broader economic trajectory remains favorable. Sustained improvements in external accounts, rising forex reserves, and record-high remittances create a strong foundation for long-term currency stability. However, continuous efforts to manage external finances and encourage inflows will remain critical to ensuring the rupee’s resilience in the face of fluctuating market dynamics.