Karachi, September 24, 2024 – The Pakistani rupee saw a modest recovery in the interbank foreign exchange market on Tuesday, appreciating by 7 paisas against the US dollar. At the close of trading, the rupee was valued at PKR 277.80 per dollar, compared to the previous day’s closing rate of PKR 277.87.
Currency market analysts attribute this slight recovery to renewed optimism surrounding Pakistan’s prospects of securing a $7 billion loan from the International Monetary Fund (IMF). The IMF’s executive board is set to meet on September 25, 2024, to review Pakistan’s request, with many experts predicting that a favorable decision could provide much-needed financial support and instill greater confidence in the market.
The prospect of IMF assistance comes at a critical juncture for Pakistan, which has been grappling with economic challenges, including inflation, mounting debt, and a widening fiscal deficit. A successful agreement with the IMF could lead to an inflow of funds that would help stabilize the economy and shore up the country’s foreign exchange reserves.
In the lead-up to the IMF’s decision, Pakistan’s economic indicators have shown signs of improvement. Data from the State Bank of Pakistan (SBP) revealed that the nation’s foreign exchange reserves grew by $31 million in the week ending September 13, 2024. The reserves now stand at $14.827 billion, up from $14.796 billion a week earlier. While the increase in reserves is relatively small, it is nonetheless viewed as a positive signal for the rupee, contributing to its recent resilience in the face of global and domestic economic pressures.
Additionally, the significant reduction in Pakistan’s current account deficit (CAD) has also contributed to the stabilization of the currency. According to the SBP, the CAD contracted by 81% during the July-August 2024 period, narrowing to $171 million from $893 million during the same period in the previous year. The sharp reduction in the deficit is being hailed as a positive development for Pakistan’s economic outlook, as it indicates an improved balance of payments position and alleviates pressure on the rupee.
“The shrinking current account deficit is a major factor supporting the rupee,” remarked a leading currency expert. “It indicates a healthier trade balance, which reduces the strain on foreign exchange reserves and provides support for the local currency.”
Investor sentiment remains optimistic as the market eagerly awaits the IMF’s decision. Should the $7 billion loan be approved, Pakistan’s foreign reserves would receive a crucial boost, potentially leading to further gains for the rupee and enhancing overall market stability.
