Karachi, December 22, 2023 – In a surprising turn of events, the Pakistani Rupee (PKR) made a notable gain of PKR 0.26 against the US Dollar on Friday, despite a decline in the country’s foreign exchange reserves.
The local currency closed at PKR 282.53 to the dollar, showing resilience in the face of increasing demand for the dollar due to import needs and corporate payments. This positive development occurred in the interbank foreign exchange market, where the rupee surpassed the previous day’s closing rate of PKR 282.79.
The context of this gain becomes more intriguing considering the recent fall in Pakistan’s foreign exchange reserves, a matter of concern for the nation’s economic stability. Official data reveals a significant decline of $138 million in foreign exchange reserves within a week, primarily attributed to external debt repayment. As of the week ending December 15, 2023, the total foreign exchange reserves of the country stand at $12.068 billion, reflecting a drop from $12.206 billion recorded just a week earlier by the end of December 8, 2023. This decline not only raises alarms within economic circles but also poses a tangible threat to the nation’s balance of payment capacity.
Despite challenges posed by increased dollar demand for import activities and corporate payments, the Rupee has demonstrated resilience. This fortitude is underpinned by positive economic indicators signaling a more stable financial landscape. One significant factor contributing to the Rupee’s strength is the substantial contraction in the Current Account Deficit (CAD).
In the first five months (July – November) of the fiscal year 2023-24, Pakistan experienced an impressive 64.46 percent reduction in its CAD, amounting to $1.16 billion. This starkly contrasts with the $3.26 billion recorded during the corresponding period in the previous fiscal year. Analysts attribute this substantial decline to a marked reduction in the trade deficit, indicating positive trends in the country’s economic performance.
The Rupee’s ability to gain ground against the dollar amidst falling forex reserves showcases the complex interplay of various economic factors. While external debt repayment and declining reserves present challenges, positive indicators such as reduced CAD and a more favorable trade balance signal a potentially robust economic outlook.
Economic experts and policymakers will be closely monitoring these developments, as they weigh the impact of external factors on Pakistan’s economic stability. The resilience of the Rupee against adverse conditions serves as a testament to the underlying strengths of the nation’s economic fundamentals, offering a glimmer of hope amid the challenges faced by the country.
