Karachi, September 6, 2024 – The Pakistani rupee gained 11 paisas against the US dollar on Friday, closing at PKR 278.57 in the interbank market, up from the previous day’s PKR 278.68.
The appreciation is attributed to an improvement in the State Bank of Pakistan’s (SBP) foreign exchange reserves, providing a boost to market sentiment.
Currency dealers highlighted that the increase in SBP reserves has been a key factor in the rupee’s strength. According to the SBP’s report, its reserves rose by $34 million, reaching $9.437 billion by the week ending August 30, 2024, compared to $9.403 billion recorded the previous week. Although modest, this increase in foreign currency holdings comes as a positive sign amid ongoing economic challenges for Pakistan.
Additionally, a narrowing trade deficit has supported the rupee’s recent performance. The trade balance has improved due to a significant rise in exports, providing a further cushion for the local currency.
The recent upgrade in Pakistan’s credit rating by Moody’s Investors Service has also contributed to the strengthening of the rupee. Moody’s raised Pakistan’s credit rating to Caa2, citing improved macroeconomic conditions and enhanced government liquidity. This change reflects the positive impact of Pakistan’s 37-month Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF), which was reached at a staff level on July 12, 2024. The agreement is expected to stabilize the economy and boost investor confidence in the coming months.
Looking ahead, Pakistan awaits final approval for a $7 billion loan program from the IMF. While the approval process has been delayed due to pending debt rollovers and the need to address external financing gaps, the loan, combined with expected inflows from Middle Eastern banks and continued Saudi oil financing, is expected to further strengthen Pakistan’s financial position.
Market analysts predict that the rupee will likely remain stable in the short term, buoyed by steady foreign currency inflows and a favorable outlook from international credit rating agencies. Continued efforts by the government to secure additional financing are also seen as critical to maintaining the rupee’s stability in the coming weeks.
