Karachi, August 30, 2024 — The Pakistani rupee on Friday gained ground against the US dollar, recovering by 10 paisas, driven by an improvement in the country’s foreign exchange reserves. The rupee closed at PKR 278.54 per dollar in the interbank foreign exchange market, up from the previous day’s closing rate of PKR 278.64.
Currency analysts credited this modest recovery in the rupee to the recent increase in the State Bank of Pakistan’s (SBP) foreign exchange reserves. The SBP reported a $111 million rise in its reserves for the week ending August 23, 2024, bringing the total reserves held by the central bank to $9.403 billion, compared to $9.292 billion the previous week. This increase reflects an overall gain of $109 million in the country’s total net reserves, which now stand at $14.776 billion, up from $14.667 billion previously.
Analysts also noted that the rupee’s appreciation was influenced by reduced demand for the dollar to meet import payments as the month drew to a close. This seasonal factor often leads to lower dollar outflows, providing a temporary cushion to the local currency. Moreover, the improved inflows of remittances and export receipts contributed to the rupee’s stronger position against the dollar.
“The current improvement in the rupee’s value can be attributed to the increased foreign exchange reserves, which have provided a buffer against immediate external pressures,” said a leading currency analyst. “However, the sustainability of this recovery is closely tied to the upcoming release of funds by the International Monetary Fund (IMF).”
Pakistan is currently grappling with significant challenges on the external front, including large debt repayments and a substantial trade deficit. The release of IMF funds is seen as crucial for bolstering the country’s foreign exchange reserves and maintaining stability in the currency markets.
Market watchers caution that while the recent uptick in reserves and the rupee’s recovery are positive signs, they do not fully alleviate concerns about the country’s economic outlook. The rupee remains vulnerable to external shocks, particularly if the anticipated IMF funds are delayed or if there is a resurgence in demand for the dollar due to import or debt servicing requirements.
As Pakistan navigates these turbulent economic waters, the outlook for the rupee will largely depend on the government’s ability to manage external liabilities and secure continued support from international financial institutions. Until then, the rupee’s path will remain uncertain, closely following developments in foreign reserves and external financing arrangements.
