Karachi, February 2, 2024 – The Pakistani Rupee (PKR) exhibited a nominal gain on Friday, closing at PKR 279.41 against the US dollar in the interbank foreign exchange market.
The modest appreciation of PKR 0.07 from the previous day’s closing of PKR 279.48 was attributed to lower demand for imports and corporate payments, which helped maintain stability in the currency.
Currency experts pointed out that despite a decline in foreign exchange reserves, the local unit remained resilient against the dollar. The lower demand for imports and corporate payments played a crucial role in supporting the rupee amidst economic challenges.
Pakistan is grappling with a concerning economic setback, as official data from the State Bank of Pakistan (SBP) reveals a significant decline of $78 million in the country’s weekly foreign exchange reserves. The latest figures, released on Thursday, indicate a drop from $13.341 billion to $13.263 billion for the week ending January 26, 2024. This decline has raised concerns among economic analysts and policymakers.
Despite the decline in reserves, the recent strengthening of the Pakistani currency can be attributed to several factors. One significant influence is the injection of funds, including a substantial $700 million from the International Monetary Fund (IMF). This financial boost has played a pivotal role in enhancing the country’s balance of payments and stabilizing the exchange rate.
Effective fiscal policies and a favorable trade balance have also contributed to the strengthening of the Rupee. The first half of fiscal year 2023-24 witnessed a substantial 16.28 percent decrease in the import bill, falling from $31.21 billion to $26.13 billion. In contrast, exports experienced a commendable 5.17 percent increase, reaching $14.98 billion. This contributed to a 34.79 percent contraction of the trade deficit, dropping from $16.96 billion to $11.15 billion during the same period.
The injection of funds, coupled with prudent fiscal policies and a positive trade balance, has provided stability to the Pakistani Rupee in the face of declining foreign exchange reserves. However, economists and policymakers are closely monitoring the situation, given the challenges posed by the economic setbacks and the need for sustainable strategies to ensure long-term stability in the currency and the overall economy.
