Rupee Eases by 4 Paisas Amid Dollar Demand for Imports

Rupee Eases by 4 Paisas Amid Dollar Demand for Imports

Karachi, July 2, 2024 – The Pakistani Rupee depreciated by 4 paisas against the US dollar on Tuesday, closing at PKR 278.38 compared to PKR 278.34 at the last session on June 28, 2024, in the interbank foreign exchange market.

The decline was primarily driven by heightened demand for the dollar to cover foreign payment obligations related to imports.

Currency analysts pointed to the reopening of the currency market after weekly and bank holidays as a key factor amplifying the demand for foreign exchange. This surge in dollar demand coincided with a noticeable decrease in Pakistan’s foreign exchange reserves, which fell by $208 million to $14.207 billion for the week ending June 21, 2024, as reported by the State Bank of Pakistan (SBP).

The SBP’s official reserves specifically saw a significant decline, dropping by $239 million to $8.896 billion during the same period, primarily due to government repayments against foreign loans. This reduction underscores ongoing challenges in managing Pakistan’s external debt obligations and stabilizing its financial position.

In response to these economic pressures, Pakistan has actively sought support from international financial institutions and friendly nations to bolster its economic resilience. The country’s efforts to secure external financial support aim to mitigate the impact of declining reserves and address fiscal challenges.

Furthermore, recent measures outlined in the 2024-25 budget have been pivotal in shaping market dynamics. The budget focused on fiscal consolidation, which includes measures to reduce the fiscal deficit and enhance revenue generation. These measures have contributed to a cautious approach among importers, moderating immediate dollar demand and providing some support to the rupee.

Looking ahead, economic analysts are closely monitoring further policy developments and external economic factors that could influence the trajectory of the rupee. As Pakistan navigates its fiscal year, market participants will scrutinize ongoing efforts to manage external debt and enhance economic stability amidst global economic uncertainties.

The recent depreciation of the rupee underscores the delicate balance Pakistan must maintain between managing its external obligations and sustaining economic growth. With continued vigilance and strategic policy interventions, stakeholders remain hopeful for stabilizing currency movements in the coming months, aligning with broader economic recovery goals.