The Pakistani rupee strengthened by 41 paisas against the US dollar in the interbank market on Friday, buoyed by significant inflows from the World Bank. The rupee closed at 286.35 per dollar, compared to the previous day’s closing rate of 286.76.
Traders and analysts attributed the rupee’s gain to the receipt of $500 million from the World Bank under the Resilient Institutions for Sustainable Economy (RISE) program. The funds are intended to support Pakistan’s economic reforms and bolster its foreign exchange reserves, which have been under pressure due to ongoing balance of payments challenges.
Market sentiment was further bolstered by expectations of additional inflows from multilateral and bilateral sources in the coming weeks. These inflows are crucial for Pakistan to meet its external financing needs and stabilize the local currency amid global economic uncertainties and domestic challenges.
“The World Bank’s disbursement has provided much-needed relief to the forex market. It has eased pressure on the rupee, at least in the short term,” said Ali Raza, a currency analyst at Tresmark. “We are also anticipating further support from the IMF and other international partners, which should help maintain this positive momentum.”
In addition to the World Bank’s funds, positive sentiments were also driven by reports that Pakistan is making progress in its discussions with the International Monetary Fund (IMF) for the next tranche of its $6 billion Extended Fund Facility (EFF). Successful negotiations with the IMF could unlock further financial support and enhance market confidence in Pakistan’s economic prospects.
However, economists caution that while these inflows provide temporary relief, Pakistan must address structural issues in its economy to ensure long-term stability. Reforms in the energy sector, tax collection, and governance are seen as critical to sustaining economic growth and improving the country’s fiscal health.
The rupee’s recent gains have provided a breather to importers, who have faced increased costs due to the currency’s depreciation over the past year. However, exporters might feel the pinch as a stronger rupee makes Pakistani goods more expensive on the international market.
The coming weeks will be crucial for the rupee as the government navigates its financial commitments and continues its reform agenda in collaboration with international financial institutions.
