Karachi, January 3, 2024 – The Pakistani Rupee (PKR) displayed strength on Wednesday, gaining PKR 0.17 against the US dollar at the close of the interbank foreign exchange market.
The exchange rate concluded at PKR 281.72 to the dollar, marking a positive shift from the previous day’s closing rate of PKR 281.89.
Currency analysts attribute the rupee’s gain to a decline in the import bill, as reported by the Pakistan Bureau of Statistics (PBS) a day earlier. Pakistan’s import bill experienced a substantial drop of 16.28 percent during the first half (July – December) of the fiscal year 2023-24. The figures indicate a significant reduction from $31.21 billion in the corresponding period of the previous fiscal year to $26.13 billion in the current fiscal year.
Market analysts emphasize the surge in foreign exchange reserves as a key factor contributing to the rupee’s stability. The State Bank of Pakistan (SBP) reported a substantial increase of $852 million in its official foreign exchange reserves for the week ending December 22, 2023. This boost elevated the central bank’s reserves from $6.905 billion to $7.757 billion, signaling a positive turn in Pakistan’s economic landscape.
The SBP attributes this notable increase to substantial foreign inflows received by the government of Pakistan. Economists view this development optimistically, stating that it will play a crucial role in managing the country’s balance of payments and enhancing its external debt repayment capacity.
The overall foreign exchange reserves for Pakistan, encompassing both central bank and commercial bank holdings, experienced a combined boost of $788 million. By the week ending December 22, 2023, the total reserves reached $12.856 billion, compared to the previous week’s level of $12.068 billion. This surge is seen as a positive development that could help allay concerns about the country’s economic stability.
A significant contributor to the Rupee’s stability is the substantial reduction in the Current Account Deficit (CAD). From July to November of the fiscal year 2023-24, Pakistan witnessed a notable 64.46 percent reduction in its CAD, totaling $1.16 billion. This contrasts sharply with the $3.26 billion recorded during the same period in the previous fiscal year. Analysts attribute this decline to a significant reduction in the trade deficit, signaling positive trends in the country’s economic performance.
Despite challenges such as increased demand for the US dollar, the Rupee’s ability to gain ground against the dollar underscores the intricate interplay of economic factors. The positive trajectory in foreign exchange reserves and the reduction in the CAD position Pakistan favorably as it moves into the new year, instilling confidence in the economic outlook and stability of the national currency. Investors and analysts will continue to monitor these trends closely as they shape the economic landscape in the coming months.
