Karachi, September 9, 2024 – The Pakistani rupee dipped by 13 paisas against the US dollar on Monday, reflecting a tough start to the week for the local currency amid growing import payment demand. The rupee closed at PKR 278.70 to the dollar in the interbank foreign exchange market, compared to last Friday’s closing rate of PKR 278.57.
Currency dealers pointed to increased foreign payment obligations as the primary cause of the rupee’s downward movement. The first trading day of the week typically brings higher foreign exchange demand from importers, which adds pressure to the local currency.
Additionally, dealers highlighted uncertainty surrounding Pakistan’s ongoing negotiations with the International Monetary Fund (IMF). The executive board of the IMF is still deliberating on whether to release further installments of its loan program for Pakistan. This uncertainty is contributing to market apprehension, with traders adopting a cautious approach toward the rupee.
However, there remains hope for stabilization in the coming days, as some positive economic indicators have emerged. Dealers are optimistic that the rupee may remain steady due to an uptick in foreign exchange reserves and improved export receipts.
According to a report by the State Bank of Pakistan (SBP), the country’s foreign reserves increased by $34 million during the week ending August 30, 2024. The reserves now stand at $9.437 billion, compared to $9.403 billion recorded the previous week. Although this increase is modest, it is considered a positive sign amidst Pakistan’s ongoing economic difficulties.
Market sentiment has also been buoyed by a narrowing trade deficit, thanks to stronger export performance. An improving trade balance has helped cushion the rupee from further depreciation, with increased export revenues contributing to foreign currency inflows.
Analysts predict that the rupee is likely to remain relatively stable in the short term. A steady stream of foreign currency inflows, coupled with a favorable outlook from international credit rating agencies, is seen as providing support for the local currency. Additionally, the government’s efforts to secure additional financing, either from bilateral or multilateral sources, are considered key to maintaining the rupee’s stability.
While challenges persist, the rupee’s performance over the next few weeks will depend on several factors, including the outcome of IMF negotiations, further improvement in the trade deficit, and continued growth in foreign exchange reserves.
