Karachi, March 8, 2024 – The Pakistani Rupee (PKR) showcased a remarkable recovery on Friday, closing at PKR 279.04 against the dollar in the interbank foreign exchange market.
This represented a significant gain of PKR 0.25 compared to the previous day’s closing rate of PKR 279.29. The currency market attributes this resurgence to the improved outlook of the Pakistan banking sector and a substantial surge in remittances.
The positive momentum in the rupee’s value comes on the heels of an improved rating for Pakistani banks by the international rating agency Moody’s. Just a day before the rupee’s recovery, Moody’s upgraded the ratings of Pakistani banks from negative to stable. This development has contributed to a positive sentiment surrounding the country’s financial sector, enhancing confidence in the rupee.
The surge in remittances has also played a crucial role in the rupee’s recent gains. The State Bank of Pakistan (SBP) reported a notable 13 percent Year-on-Year (YoY) growth in workers’ remittances to Pakistan in February 2024. The inflow of remittances reached $2.25 billion during the month, compared to $1.99 billion in the same period the previous year. This surge in remittances signals a positive trend for the country’s economy and has likely contributed to the stability and strength of the Pakistani Rupee.
However, amidst these positive developments, concerns have emerged regarding the stability of the rupee due to a fall in foreign exchange reserves. The SBP reported a significant decrease of $54 million in its weekly foreign exchange reserves, indicating a drop to $7.896 billion by the week ending March 1, 2024, compared to $7.950 billion recorded a week earlier, as of February 23, 2024.
When considering the official reserves along with those of commercial banks, the net foreign exchange reserves of Pakistan experienced a decline of $19 million on a weekly basis. As of March 1, 2024, the combined reserves stood at $13.02 billion, compared to $13.039 billion recorded a week earlier. This dip raises concerns about the overall foreign exchange stability of the country, as it indicates a decrease in the available reserves to cushion against economic uncertainties.
The juxtaposition of a stronger rupee and declining foreign exchange reserves underscores the delicate balance that the country’s economic landscape is currently navigating. While positive indicators, such as improved bank ratings and robust remittance inflows, bolster the confidence in the rupee, the dip in foreign exchange reserves warrants careful monitoring.
Market analysts and policymakers will closely observe how these dynamics unfold in the coming weeks, evaluating the impact on the broader economic stability of Pakistan. As the country strives for a resilient and robust economic foundation, the ebb and flow of currency values and foreign exchange reserves remain critical factors in shaping its financial future.
