Karachi, September 4, 2024 – The Pakistani rupee continued its downward trajectory for the third consecutive session on Wednesday, closing at PKR 278.77 against the US dollar in the interbank foreign exchange market. This represents a modest decline of 7 paisas from the previous day’s closing rate of PKR 278.70.
The rupee had earlier stood at PKR 278.54 against the dollar on August 30, 2024, but has since been under consistent pressure, driven primarily by a surge in import payments. This increased demand for the dollar has exerted downward pressure on the local currency.
Despite this dip, market analysts remain cautiously optimistic about the rupee’s stability in the short term. They attribute the recent depreciation to a temporary adjustment rather than the beginning of a prolonged downtrend. This optimism is bolstered by several positive economic indicators, including a rise in Pakistan’s foreign exchange reserves and improved investor sentiment.
The State Bank of Pakistan (SBP) reported a modest increase in foreign exchange reserves, which rose by $112 million to reach $9.403 billion as of August 23, 2024. This increase has been welcomed by market participants, who see it as a sign of financial stability. The augmented reserves provide a buffer against external economic shocks and are crucial in maintaining the value of the rupee.
Adding to the positive outlook, Moody’s Investors Service recently upgraded Pakistan’s credit rating to Caa2. The upgrade was attributed to improved macroeconomic conditions and better government liquidity and external positions. The upgrade is partly due to the 37-month Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF), reached at a staff level on July 12, 2024. This agreement has played a significant role in enhancing investor confidence and is expected to contribute to economic stability in the coming months.
Pakistan is also awaiting final approval from the IMF’s executive board for a new $7 billion loan program. The approval has been delayed due to pending confirmations of debt rollovers and the need to bridge the country’s external financing gap. In addition to the IMF loan, Pakistan is seeking approximately $4 billion in loans from Middle Eastern banks. Negotiations are also underway for the continuation of Saudi Arabia’s oil financing facility, which would further bolster Pakistan’s financial position.
Looking ahead, market analysts expect the rupee to trade within its current range over the coming weeks, supported by steady inflows of foreign currency and a positive outlook from international credit rating agencies. The government’s efforts to secure additional financing are also expected to contribute to the rupee’s stability in the near future.
