Karachi, December 27, 2023 – The Pakistani Rupee (PKR) inched up by PKR 0.17 against the US dollar on Wednesday amid heavy foreign currency demand for import and corporate payments.
The interbank foreign exchange market ended at PKR 282.20 to the dollar from previous day’s closing of PKR 282.37.
Currency experts noted that despite the surge in demand for the US dollar, the local currency demonstrated stability against the greenback. The nominal gain is particularly noteworthy given recent concerns surrounding Pakistan’s foreign exchange reserves, which witnessed a substantial decline of $138 million within a week. Official data reveals that by the end of the week on December 15, 2023, the country’s total foreign exchange reserves stood at $12.068 billion, down from $12.206 billion recorded just a week earlier by the end of December 8, 2023. This decline has raised alarms within economic circles, posing a tangible threat to the nation’s balance of payment capacity.
The economic landscape, however, holds signs of resilience and strength. One of the key factors supporting the Rupee’s stability is the significant 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 stands in stark contrast to the $3.26 billion recorded during the corresponding period in the previous fiscal year. Analysts attribute this remarkable decline to a substantial reduction in the trade deficit, indicating positive trends in the country’s economic performance.
Despite the challenges posed by increased demand for the US dollar for imports and corporate payments, the Rupee’s ability to gain ground against the dollar showcases the complex interplay of various economic factors. The declining foreign exchange reserves and external debt repayment pressures are significant concerns, yet positive indicators such as the reduced CAD and a more favorable trade balance signal a potentially robust economic outlook.
Economic experts and policymakers are closely monitoring these developments as they assess 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.
As the year comes to an end, market observers will be keenly watching for further developments in the foreign exchange market and the overall economic situation. The delicate balance between external pressures and domestic strengths will continue to shape Pakistan’s economic trajectory in the coming months.
