Karachi, January 22, 2024 – In a positive turn of events, the Pakistani Rupee (PKR) closed at PKR 279.85 against the US dollar in the interbank foreign exchange market on Monday, marking a gain of PKR 0.05 from last Friday’s closing rate of PKR 279.90.
Currency experts attribute this upward trajectory to encouraging reports from the external front and sustained inflows, despite increased demand on the first trading day of the week.
The injection of funds from international sources, particularly the substantial $700 million from the International Monetary Fund (IMF), has played a pivotal role in bolstering the Rupee. The financial support, coupled with sound fiscal policies, has shielded the Pakistani currency from the uncertainties prevailing in the global economic landscape.
One of the significant impacts of these developments is evident in the surge of Pakistan’s foreign exchange reserves. According to the State Bank of Pakistan (SBP), the reserves rose by an impressive $36 million, reaching $13.257 billion by the week ending January 5, 2024, compared to $13.221 billion recorded on December 29, 2023.
While the recent increase in reserves is a positive sign, economic analysts stress the importance of a comprehensive perspective. Despite the improvement, reserves are still below the levels observed in August 2021, making it essential to monitor the trajectory of Pakistan’s reserves to understand the factors shaping this positive trend.
Experts point to several factors contributing to the strengthening of the Rupee, including a narrowing trade deficit and a decline in the import bill. In the first half of fiscal year 2023-24 (July – December), the import bill witnessed a significant decrease of 16.28 percent, dropping from $31.21 billion in the corresponding period of the previous fiscal year to $26.13 billion.
Conversely, the country experienced positive growth in exports, witnessing a commendable increase of 5.17 percent during the same period. Exports rose to $14.98 billion, up from $14.24 billion in the previous fiscal year, resulting in a substantial contraction of the trade deficit by 34.79 percent, reducing it from $16.96 billion to $11.15 billion in the first half of fiscal year 2023-24.
The combination of increased foreign exchange reserves, a shrinking trade deficit, and a reduced import bill signals robust economic performance for Pakistan, instilling confidence in the financial markets. Currency experts anticipate that sustained prudent fiscal policies and effective management of external balances will be pivotal in maintaining the positive momentum of the Pakistani Rupee against the US dollar in the coming months.
As Pakistan navigates the global economic landscape, these indicators paint a promising picture for the nation’s economic stability and resilience. The strengthening Rupee not only reflects the impact of recent international financial support but also showcases the effectiveness of domestic economic measures, positioning Pakistan as a resilient player in the ever-changing global economic scenario.
