Karachi, January 16, 2024 – The Pakistan Rupee (PKR) closed unchanged against the US dollar at PKR 280.25 on Tuesday, maintaining stability in the foreign exchange market. The flat closing comes amidst growing foreign currency demand for import payments.
The local currency’s resilience at the current level, matching the previous day’s closing at PKR 280.24 in the interbank foreign exchange market, reflects its recent consistent gains against the US dollar. Currency experts attribute this positive trend to the influx of foreign funds, particularly significant inflows received by the State Bank of Pakistan (SBP) in recent weeks.
The recent injection of $700 million from the International Monetary Fund (IMF) has played a crucial role in bolstering the Rupee’s performance. Analysts suggest that this influx, combined with prudent fiscal policies, has contributed to the Rupee’s resilience and stability in the face of global economic uncertainties.
The impact of these developments is underscored by the substantial increase in Pakistan’s foreign exchange reserves. The SBP reported a notable rise of $36 million, reaching $13.257 billion by the week ending January 5, 2024. This positive momentum contrasts with the reserves of $13.221 billion recorded on December 29, 2023.
While the recent surge in foreign exchange reserves is a positive indicator for Pakistan’s economic stability, analysts emphasize the need to consider the broader context of this improvement. Despite the increase, the current reserves remain below the robust levels observed in August 2021. Economic experts are closely monitoring Pakistan’s reserve trajectory to understand the factors contributing to this recent trend.
Among the factors fortifying the Pakistani Rupee, experts point to the narrowing trade deficit and a declining import bill. In the first half of the fiscal year 2023-24 (July – December), the country’s import bill experienced 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, Pakistan saw positive growth in its exports, marking 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. This positive trajectory resulted 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.
