The Pakistani rupee is poised to maintain its downward trajectory against the US dollar in the week commencing on August 28, 2023.
As concerns over its dwindling value persist, some market analysts speculate that the central bank may intervene to prevent further depreciation.
READ MORE: Pakistani Rupee Hits All-Time Low at PKR 301 to Dollar in Interbank Market Closing
Over the course of the past week, the rupee suffered a steep decline of 1.3 percent against the dollar. Beginning the week at 297.13 per dollar, it concluded on a somber note at 301 by the close of trading on Friday.
A key contributor to the rupee’s devaluation is the escalating import outflows and the ongoing reduction in inflows, largely driven by declining exports and remittances. According to market experts, these factors are unlikely to allow the local currency to stabilize in the near future.
READ MORE: US Dollar Makes Historic High at PKR 300.22 in Interbank Closing
One significant factor behind the rupee’s depreciation has been the lifting of import restrictions following Pakistan’s $3 billion stand-by arrangement with the International Monetary Fund (IMF). This has put immense pressure on the local currency by opening the doors to increased imports. Additionally, the repatriation of profits by foreign businesses operating in Pakistan has exacerbated the situation.
In an effort to align with the IMF’s requirements, the interbank market is also catching up by maintaining a 1.25 percent exchange rate gap between the interbank and open markets.
Furthermore, the falling foreign exchange reserves pose another challenge for the rupee in the upcoming week starting August 28, 2023. According to data from the State Bank of Pakistan (SBP), foreign exchange reserves saw a significant drop of $131 million during the week ending August 18, 2023. This decline is indicative of a worrisome trend, with reserves plummeting from $13.379 billion on August 11, 2023, to a meager $13.248 billion by August 18, 2023. This current level is a stark contrast to the robust reserves of $27.2 billion that Pakistan boasted in August 2021.
READ MORE: Pakistani Rupee Hits Historic Low of PKR 299.01 to US Dollar at Interbank Closing
As the rupee continues its downward journey, market observers are closely monitoring the situation, with a watchful eye on the actions of the central bank and any potential interventions aimed at stabilizing the currency. In the face of ongoing economic challenges, Pakistan’s financial authorities face a delicate balancing act to ensure the stability of the local currency in the weeks ahead.
