Karachi, September 12, 2024 – The Pakistani rupee gained 10 paisas against the US dollar on Thursday, closing at PKR 278.44 in the interbank market, up from the previous day’s PKR 278.54. This marginal appreciation is primarily due to reduced demand for dollars to pay for imports, especially as global oil prices have sharply declined.
Currency analysts highlight that the fall in international oil prices has been a key driver behind the rupee’s gains. As Pakistan is a major importer of petroleum products, the lower global oil prices have significantly reduced the country’s import bill. With fewer dollars needed for oil payments, the pressure on the local currency has eased, allowing the rupee to strengthen.
“The drop in oil prices has provided crucial relief to Pakistan’s external account,” said a currency analyst. “Lower import payments, particularly for energy, have helped stabilize the rupee.”
Apart from the dip in oil prices, the Pakistani rupee’s stability has been supported by other positive developments in the country’s economy. Foreign exchange reserves have shown a modest improvement, contributing to a more optimistic outlook for the local currency. According to a recent report from the State Bank of Pakistan (SBP), the country’s foreign reserves increased by $34 million in the week ending August 30, 2024, bringing the total reserves to $9.437 billion. While the rise is relatively small, it is a welcome sign amidst Pakistan’s broader economic struggles.
Additionally, stronger export receipts and a narrowing trade deficit have bolstered the rupee. Improved export performance, alongside reduced imports, has increased foreign currency inflows, lending further stability to the currency.
“Pakistan’s trade balance has been improving, which has been another factor supporting the rupee. Stronger exports and lower imports are helping maintain foreign exchange inflows,” added an economic expert.
The market sentiment remains cautiously optimistic regarding the rupee’s performance in the near term. Analysts believe that as long as foreign currency inflows remain steady and global oil prices stay low, the rupee is likely to maintain its current position. A favorable outlook from international credit rating agencies and the government’s ongoing efforts to secure additional financing from multilateral sources are also expected to support the currency.
However, challenges persist. The rupee’s future performance will depend on Pakistan’s continued negotiations with the International Monetary Fund (IMF) and its ability to further reduce the trade deficit and strengthen foreign reserves. For now, falling oil prices have provided much-needed relief for the Pakistani rupee, easing import pressures and stabilizing the exchange rate.
