Karachi, September 20, 2024 – The Pakistani rupee appreciated slightly on Friday, closing at PKR 277.84 against the US dollar in the interbank foreign exchange market, registering a gain of 7 paisas from the previous day’s closing rate of PKR 277.91.
Currency analysts have attributed the modest increase in the rupee’s value to a combination of factors, primarily improved foreign exchange reserves and a narrowing current account deficit (CAD). These developments have contributed to a more favorable economic outlook, bolstering confidence in the local currency.
According to data released by the State Bank of Pakistan (SBP), the country’s net foreign exchange reserves grew by $31 million during the week ending September 13, 2024, bringing the total reserves to $14.827 billion, up from $14.796 billion recorded the previous week on September 6. The uptick in reserves has been seen as a stabilizing factor for the rupee amid Pakistan’s ongoing economic challenges.
In addition to the rise in foreign exchange reserves, a sharp reduction in the current account deficit has been cited as a key factor driving the rupee’s appreciation. The SBP report highlighted an 81% contraction in the CAD for the period between July and August 2024. The deficit narrowed to $171 million, a significant drop from the $893 million recorded during the same period of the previous fiscal year.
“The shrinking CAD has been a major positive factor for the rupee’s performance. It reflects a healthier balance of payments position and contributes to greater stability in the currency,” said a currency expert, explaining the broader impact of the deficit reduction on Pakistan’s foreign exchange market.
Market sentiment has also been buoyed by anticipation surrounding Pakistan’s ongoing negotiations with the International Monetary Fund (IMF). The IMF is expected to review Pakistan’s loan program on September 25, 2024. Investors are hopeful that the review will result in the approval of a $7 billion bailout package, which would provide critical financial support to Pakistan’s struggling economy.
The combination of improved foreign exchange reserves, a narrowed current account deficit, and optimism over a potential IMF bailout has contributed to the rupee’s slight but significant appreciation. Analysts believe that if these positive trends continue, the rupee could experience further stability in the coming months.
