KARACHI, October 4, 2024 – In a notable development, the Pakistani rupee appreciated to PKR 277.52 against the US dollar on Friday, bolstered by an improvement in the nation’s foreign exchange reserves.
The rupee’s gain of 22 paisas from the previous day’s close of PKR 277.74 in the interbank market signifies a momentary yet critical stabilization in the country’s volatile currency landscape.
Currency analysts credited the rupee’s appreciation to a substantial surge in Pakistan’s foreign exchange reserves, which are now nearing $16 billion. This positive shift is largely attributed to recent inflows from the International Monetary Fund (IMF), providing much-needed relief to Pakistan’s fragile economy. According to the State Bank of Pakistan (SBP), the reserves grew by $1.11 billion to reach $15.98 billion as of September 27, 2024. This jump from the previous week’s reserves of $14.873 billion signals a stronger buffer for the country, which has been grappling with escalating inflation and a tenuous balance of payments.
The increase in reserves has been hailed as a vital step in stabilizing the economy, which has been under pressure due to geopolitical tensions, escalating import bills, and depleting dollar reserves. A narrowing of the current account and trade deficits has further contributed to the improved balance of payments, alleviating some of the pressure on the rupee.
Experts noted that the rupee’s recent strength has emerged despite increased demand for the US dollar to finance imports, especially in the face of geopolitical uncertainties. The resilience demonstrated by the rupee is reflective of broader structural improvements within the economy. These include a reduced current account deficit and improved trade dynamics, both of which have eased the demand for foreign currency and provided breathing space for the local unit.
Additionally, a rise in remittances from overseas Pakistanis and robust export receipts have fortified market confidence, leading to a softer demand for dollars and lending support to the rupee’s value.
While the rupee’s appreciation is encouraging, analysts caution that sustained economic reforms and prudent fiscal management are essential to maintain this upward momentum. Pakistan’s economic landscape remains susceptible to external shocks, and the next few months will be crucial in determining whether this upward trajectory can be maintained.
The improvement in foreign exchange reserves has undoubtedly provided some respite, but continuous efforts are required to safeguard the rupee against future depreciation and stabilize Pakistan’s macroeconomic fundamentals.