Karachi, January 12, 2024 – In a positive turn of events for Pakistan’s economic landscape, the Pakistani Rupee (PKR) experienced a noteworthy appreciation of PKR 0.75 against the US dollar on Friday.
The surge in the rupee’s value is attributed to the recent approval by the International Monetary Fund (IMF) of a tranche amounting to $700 million for Pakistan.
The interbank foreign exchange market closed with the rupee trading at PKR 280.36 to the dollar, marking a gain from the previous day’s closing rate of PKR 281.11. Currency analysts point to the IMF approval as a key catalyst for this uptick in the local currency, as the inflow of $700 million provides a significant boost to Pakistan’s foreign exchange reserves.
The positive impact on the rupee is further emphasized by the recent increase in the country’s foreign exchange reserves. According to the State Bank of Pakistan (SBP), foreign exchange reserves witnessed a substantial rise of $36 million, reaching $13.257 billion by the week ending January 5, 2024. This positive momentum is a welcome development, especially when compared to the reserves of $13.221 billion recorded on December 29, 2023.
While the recent surge in foreign exchange reserves is a positive sign for Pakistan’s economic stability, it is essential to contextualize this improvement. Despite the $36 million increase, the current reserves remain below the robust levels observed in August 2021. Economic analysts have been closely monitoring Pakistan’s reserve trajectory, investigating the contributing factors to the recent trend.
Experts highlight the shrinking trade deficit and a decreasing import bill as additional factors contributing to the strengthening of the Pakistani Rupee. During the first half of the fiscal year 2023-24 (July – December), the country’s import bill witnessed a significant decline of 16.28 percent, dropping 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, recording 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 resulted in 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.
