Karachi, February 4, 2024 – As Pakistan gears up for general elections scheduled for February 8, 2024, financial analysts predict that the Pakistani Rupee (PKR) is likely to maintain its stability against the US dollar in the coming week.
Several factors, including improved economic indicators, a narrowing trade deficit, and a slight easing of inflation, are contributing to the positive outlook for the rupee.
Closing at 279.41 per dollar on Friday, the rupee exhibited strength compared to the previous week’s rate of 279.59. A significant contributor to this stability was the country’s trade deficit, which saw a remarkable 30 percent reduction in January compared to the same period last year. This improvement can be attributed to a notable 27 percent surge in exports and a 4 percent drop in imports, signaling positive developments in the external trade sector.
Analysts believe that the strengthened trade balance will play a pivotal role in supporting the rupee against the US dollar. The increased resilience is expected to continue, given the ongoing efforts to boost exports and manage imports efficiently.
Additionally, the rupee received support from a marginal easing of inflation, which fell to 28.34 percent year-on-year in January, down from 29.66 percent in December. Although the monthly inflation rate rose by 1.8 percent in January, slightly exceeding the average of 1.5 percent in the past three months, the overall decline in the year-on-year figure is seen as a positive development. In the first seven months of the current fiscal year, average inflation stood at 28.73 percent, higher than the corresponding period of the previous fiscal year at 25.40 percent.
The State Bank of Pakistan opted to maintain its policy rate at 22% during the outgoing week, citing inflationary risks. The central bank’s cautious approach indicates a commitment to managing inflation while providing stability to the financial markets.
Despite the challenges posed by high inflation, the rupee has exhibited resilience and appreciated by 0.84 percent or 2.36 rupees against the dollar since the beginning of 2024. This positive trend is attributed to various macroeconomic conditions, including increased liquidity in the foreign exchange market, a reduction in the money supply, and a surplus in the balance of payments due to lower import demand.
Market experts remain cautiously optimistic, emphasizing the importance of continued efforts to strengthen the economic fundamentals and address inflationary pressures. As Pakistan heads into the general elections, the stability of the rupee against the US dollar is anticipated to remain a key focus for investors and policymakers alike.
