Karachi, January 5, 2024 – The Pakistani Rupee (PKR) demonstrated resilience on Friday, gaining PKR 0.27 against the US dollar, a positive development attributed to the significant surge in foreign exchange reserves.
The interbank foreign exchange market concluded at PKR 281.40 to the dollar, marking a noteworthy shift from the previous day’s closing rate of PKR 281.67.
Financial analysts assert that the consistent appreciation of the rupee can be directly linked to the recent upswing in foreign exchange reserves, particularly within the last 15 days. The State Bank of Pakistan (SBP) reported an impressive increase of $1.26 billion in reserves, with $852 million added in the week ending December 22, 2023, and an additional $464 million by the week concluding on December 29, 2023.
The SBP, in an official statement, attributed this surge to an inflow of funds from the government of Pakistan. The central bank’s reserves soared to $8.22 billion by the week ending December 29, 2023, marking a substantial climb from $7.757 billion just a week earlier on December 22, 2023.
Experts highlight the role of a shrinking trade deficit and a decreasing import bill as additional factors contributing to the strengthening of the Pakistani Rupee. The import bill for the country witnessed a noteworthy decline of 16.28 percent during the first half (July – December) of the fiscal year 2023-24, plummeting from $31.21 billion in the corresponding period of the previous fiscal year to $26.13 billion in the current fiscal year.
Conversely, Pakistan experienced positive growth in its exports, with a commendable increase of 5.17 percent during the first half of the current fiscal year. Exports rose to $14.98 billion, up from $14.24 billion in the same period of the preceding fiscal year. This positive trajectory led to a substantial contraction of the trade deficit by 34.79 percent, reducing it from $16.96 billion in the corresponding period of the previous fiscal year 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 showcases a robust economic performance for Pakistan, instilling confidence in the financial markets. Currency experts predict that continued prudent fiscal policies and effective management of external balances will play a pivotal role in maintaining the positive momentum of the Pakistani Rupee against the US dollar in the coming months. As the country navigates through economic challenges, these developments bring optimism for sustained economic stability and growth.
