Karachi, October 16, 2024 – The Pakistani rupee faced its third consecutive decline on Wednesday, closing at PKR 277.84 against the US dollar in the interbank foreign exchange market. This marked a 10-paisa fall from the previous day’s closing rate of PKR 277.74.
Currency market analysts attribute the ongoing weakening of the rupee to rising demand for the dollar, primarily driven by increased import activity and corporate obligations. Importers and businesses have been actively seeking foreign currency to settle payments, intensifying pressure on the local currency. The rupee’s struggle reflects the delicate balance in the face of global economic uncertainties.
Despite the rupee’s gradual decline, financial experts remain cautiously optimistic about its near-term prospects. A key factor underpinning this optimism is the recent improvement in Pakistan’s foreign exchange reserves. The State Bank of Pakistan (SBP) reported an increase in reserves, which rose to $16.05 billion as of the week ending October 4, 2024, marking a $64 million gain from the previous week’s figure of $15.983 billion. This improvement in reserves is seen as a positive sign, potentially helping to stabilize the rupee in the coming weeks.
Additionally, Pakistan’s trade balance and current account deficits have shown significant improvement in recent months, easing the pressure on foreign exchange reserves. The narrowing of these deficits has been welcomed by economists, as it reduces the country’s need for foreign currency to meet external payment obligations. “The shrinking trade and current account deficits are promising developments for the rupee’s future stability,” said a leading currency expert.
Export growth and strong inflows from workers’ remittances are also expected to provide support for the rupee. Remittances, which constitute a major portion of Pakistan’s foreign exchange inflows, have been resilient, and their steady growth is anticipated to back the local currency further. Export receipts are similarly projected to remain strong, contributing positively to the currency’s stability.
However, market experts have cautioned that potential risks could still disrupt the rupee’s stability. Shifts in global economic conditions, fluctuations in commodity prices, or unexpected domestic challenges could undermine the rupee’s position. Despite these concerns, the overall outlook remains positive due to improving economic indicators, including the strengthening of reserves and reduced deficits.
As Pakistan continues to take strides toward improving its economic fundamentals, the rupee may see greater stability, though careful monitoring of both domestic and international factors remains crucial.