Karachi, August 25, 2024 – The Pakistani rupee is likely to remain stable against the US dollar in the coming week starting August 26, 2024, due to balanced demand and supply conditions in the foreign exchange market.
Throughout the outgoing week, the rupee-dollar parity remained relatively stable. The rupee saw a minor appreciation, closing at Rs278.5 on Friday, compared to the previous week’s closing rate of Rs278.54.
Currency experts have attributed this stability to the normal demand for dollars from importers and a steady supply in the market. “The stability in dollar-rupee parity is mainly due to the consistent demand and supply situation,” noted a currency dealer.
Furthermore, the country’s foreign exchange reserves have remained steady, bolstering confidence in the local currency. According to the State Bank of Pakistan (SBP), the reserves held by the central bank rose by $19 million to $9.292 billion for the week ending August 16, 2024. Additionally, the overall foreign exchange reserves increased by $22 million, reaching $14.667 billion, with reserves of commercial banks also experiencing a slight rise of $3 million, bringing them to $5.376 billion.
The improvement in Pakistan’s foreign exchange reserves is primarily due to the declining current account deficit and an uptick in remittances and exports. The current account deficit saw a significant reduction of 78 percent, falling to $162 million in July. Meanwhile, remittances surged by 48 percent to $3 billion in July, supporting the balance of payments. Exports also witnessed a growth of 13 percent, totaling $2.391 billion, while imports rose by 16 percent to $4.819 billion.
Currency market participants are also closely monitoring the anticipated approval of the International Monetary Fund’s (IMF) executive board regarding a staff-level agreement (SLA). This approval, expected next month, could further strengthen the rupee. “The IMF’s endorsement of the SLA is crucial as it would facilitate foreign financing from various multilateral and bilateral creditors, thereby bolstering the local currency,” said a currency dealer.
Overall, the stable foreign exchange reserves, improved external accounts, and the upcoming IMF decision provide a positive outlook for the rupee, with market experts predicting steady performance against the dollar in the near term.
