The Pakistani Rupee (PKR) experienced a notable gain of 30 paisas against the US dollar on Friday, closing at Rs214.65 in the interbank foreign exchange market.
This positive shift follows optimistic expectations regarding the release of an International Monetary Fund (IMF) tranche, signaling potential relief for the country’s economic challenges.
The exchange rate improvement is a welcome development after a two-day recovery period for the US dollar. The rupee had previously hit an all-time low of Rs239.94 against the dollar on July 28, 2022. However, recent reports of the renewal of Saudi financial assistance and a decline in international oil prices contributed to improved sentiments in the currency market, facilitating the rupee’s gain.
The State Bank of Pakistan’s (SBP) tight monitoring of the exchange rate has played a crucial role in alleviating pressure on the rupee. The central bank’s vigilant approach, coupled with positive external factors, has bolstered confidence in the currency market.
Despite the recent gains, it is essential to note that Pakistan’s foreign exchange reserves have witnessed significant depletion. As of the week ending August 12, 2022, the foreign exchange reserves increased by $52 million, reaching $13.613 billion, compared to $13.561 billion the previous week (August 05, 2022). This marks a substantial decline from the all-time high of $27.228 billion recorded on August 27, 2021, indicating a reduction of $13.615 billion since then.
The official foreign exchange reserves of the State Bank of Pakistan reported an increase of $67 million, reaching $7.897 billion by the week ended August 12, 2022, compared to $7.83 billion a week earlier. Despite this improvement, the central bank’s official reserves have fallen by $12.249 billion since reaching a record high of $20.146 billion on August 27, 2021.
The gain in the rupee’s value, coupled with the increase in foreign exchange reserves, suggests positive developments for Pakistan’s economic outlook. The anticipated release of an IMF tranche, along with supportive external factors, has contributed to the recent currency market dynamics. However, it remains crucial for the authorities to address underlying economic challenges and implement robust policies to ensure sustained stability in the foreign exchange market.
As the situation evolves, market participants will closely monitor further developments, including the IMF tranche release, oil price trends, and the overall economic landscape, to gauge the long-term impact on the Pakistani Rupee and the country’s financial stability.
