Karachi, January 2, 2025 – The Pakistani rupee experienced a modest decline of 9 paisas on Thursday, January 2, 2025, closing at PKR 278.64 to the dollar in the interbank foreign exchange market, down from PKR 278.55 on December 31, 2024.
This depreciation was largely attributed to the rising demand for the US dollar in the market following the reopening of currency trading after a bank holiday on January 1, 2025, declared by the State Bank of Pakistan (SBP).
Currency experts noted that the rupee came under pressure due to an uptick in the demand for dollars, which was fueled by import and corporate payments. A key factor in the increased demand was the release of trade data by the Pakistan Bureau of Statistics (PBS), which revealed a 17.44% rise in the country’s import bill. In December 2024, Pakistan’s imports reached $5.29 billion, compared to $4.50 billion in November 2024. This increase in imports created additional demand for foreign currency, exerting pressure on the rupee.
Moreover, the rupee’s decline was compounded by a reduction in Pakistan’s foreign exchange reserves. The SBP recently reported a decrease of $262 million in reserves within a week. As of December 20, 2024, the country’s reserves stood at $16.371 billion, a drop from $16.633 billion on December 13, 2024. Lower reserves can make it more challenging for the central bank to stabilize the currency, adding to the pressure on the rupee.
However, there are encouraging signs for Pakistan’s external sector. Between July and November 2024, the country achieved a current account surplus of $944 million, a significant improvement compared to the $1.68 billion deficit during the same period in 2023. This shift demonstrates a positive rebalancing of the economy, providing much-needed support to the rupee and boosting market confidence.
Additionally, remittances from overseas Pakistanis have surged, offering vital economic relief. In the first five months of fiscal year 2024-25, remittances grew by 34%, reaching $14.77 billion, compared to $11.05 billion during the same period in the previous year. These remittance inflows have strengthened domestic liquidity, alleviating some external financial pressures and helping stabilize the rupee’s value.
Despite the recent decline, analysts remain cautiously optimistic about the rupee’s long-term prospects, noting that the country’s external sector indicators are showing signs of improvement.