The Pakistan Rupee (PKR) showed a slight upward trend against the US dollar on Thursday, gaining six paisas in the interbank foreign exchange market.
The exchange rate closed at PKR 283.82 to the dollar, as compared to the previous day’s rate of PKR 283.88. Currency experts attributed the strengthening of the PKR to a lack of demand for dollars for import payments and a positive sentiment in the market due to a significant decline in the country’s import bill.
READ MORE: Dollar eases to PKR 283.88 at interbank closing on May 3, 2023
During the first ten months of the fiscal year 2022-2023 (July – April), Pakistan’s import bill fell by over 28 percent to $46.89 billion from $65.52 billion in the corresponding period of the previous fiscal year. This led to a contraction of the trade deficit by approximately 40 percent to $23.71 billion during the same period, as compared to the deficit of $39.27 billion in the previous year.
The decline in the import bill was primarily due to the government’s efforts to control the import of non-essential items, increase exports, and promote domestic production. These measures helped reduce the country’s dependence on imports, particularly for luxury items, and helped save foreign exchange reserves.
READ MORE: Dollar rebounds to PKR 283.92 at interbank closing on May 2, 2023
Despite the positive developments in the country’s trade balance, concerns persist for investors due to roadblocks in the International Monetary Fund (IMF) loan program. Ongoing dialogue between the ruling party and opposition to resolve election date issues has not yet yielded any concrete results. Furthermore, political uncertainty stemming from conflicts between parliament and the Supreme Court over the Punjab elections and mounting demand for foreign payments have added further pressure on the exchange rate.
Although the recent current account surplus has provided some relief to the PKR, worries remain over the decline in remittances and the depletion of foreign exchange reserves. Positive developments, such as IMF assurances, funding commitments from Saudi Arabia and the UAE, and the ease of import and corporate payments ahead of Eid holidays, have helped ease some concerns.
READ MORE: PKR makes gain against dollar amid easing political tension
In conclusion, the PKR’s slight upward trend against the US dollar is a positive development, primarily due to the decline in the country’s import bill. However, investors remain cautious due to ongoing political and economic challenges that have put pressure on the exchange rate.
The government needs to continue its efforts to control imports, promote domestic production, and increase exports to maintain a sustainable trade balance. It also needs to resolve political conflicts and engage with international organizations and friendly countries to secure financial assistance and support for the economy.
READ MORE: PKR weakens against dollar at interbank closing on April 27, 2023