Karachi, January 23, 2024 – The Pakistani Rupee (PKR) concluded on a stronger note against the US dollar, closing at PKR 279.79 in the interbank foreign exchange market on Tuesday.
This positive development, where the rupee gained PKR 0.06 from the previous day’s closing at PKR 279.85, is seen as a testament to encouraging external reports and sustained inflows, despite heightened demand throughout the day.
Currency experts attribute this upward trajectory to various factors, with one of the primary contributors being the injection of funds from international sources, notably the substantial $700 million from the International Monetary Fund (IMF). This financial support, coupled with sound fiscal policies, has played a pivotal role in shielding the Pakistani currency from the uncertainties prevailing in the global economic landscape.
A significant impact of these developments is evident in the surge of Pakistan’s foreign exchange reserves. According to the State Bank of Pakistan (SBP), reserves witnessed an impressive increase of $36 million, reaching $13.257 billion by the week ending January 5, 2024, compared to $13.221 billion recorded on December 29, 2023.
While this increase in reserves is positive, economic analysts stress the importance of a comprehensive perspective. Despite the improvement, reserves are still below the levels observed in August 2021, emphasizing the need to monitor the trajectory of Pakistan’s reserves to understand the factors shaping this positive trend.
Experts highlight several factors contributing to the strengthening of the Rupee, including a narrowing trade deficit and a decline in the import bill. In the first half of fiscal year 2023-24 (July – December), the import bill witnessed a substantial decrease of 16.28 percent, dropping from $31.21 billion in the corresponding period of the previous fiscal year to $26.13 billion.
Conversely, the country experienced positive growth in exports, with a commendable increase of 5.17 percent during the same period. Exports rose to $14.98 billion, up from $14.24 billion in the previous fiscal year, resulting in a substantial contraction of the trade deficit by 34.79 percent, reducing it from $16.96 billion to $11.15 billion in the first half of fiscal year 2023-24.
The combination of increased foreign exchange reserves, a shrinking trade deficit, and a reduced import bill signals robust economic performance for Pakistan, instilling confidence in the financial markets. Currency experts anticipate that sustained prudent fiscal policies and effective management of external balances will be pivotal in maintaining the positive momentum of the Pakistani Rupee against the US dollar in the coming months.
As Pakistan navigates the global economic landscape, these indicators paint a promising picture for the nation’s economic stability and resilience. The strengthening Rupee not only reflects the impact of recent international financial support but also showcases the effectiveness of domestic economic measures, positioning Pakistan as a resilient player in the ever-changing global economic scenario.
