KARACHI: The Pakistani rupee is projected to maintain stability in the coming week due to healthy dollar inflows from remittances and greenback sales by exporters, according to dealers and analysts. The increased liquidity of dollars in the market is expected to balance out importer demand, keeping the rupee within its current range.
This past week, the rupee showed slight strengthening against the US dollar in the interbank market. The local currency closed at 277.71 per dollar on Monday but appreciated marginally to close at 277.51 by Friday.
“We expect the rupee to remain stable next week as the supply of dollars is sufficient to meet demand from importers,” said a currency dealer, underscoring the improved liquidity conditions.
Boost from IMF Loan and Reserves
The State Bank of Pakistan’s (SBP) foreign exchange reserves recently hit their highest level in nearly two-and-a-half years, following the receipt of the first installment from the International Monetary Fund (IMF). On September 27, the SBP’s reserves surged by $1.168 billion, bringing the total to $10.7 billion — the highest since April 2022. These reserves are sufficient to cover over two months of import expenses, providing much-needed stability to the local currency.
The country’s total foreign reserves also rose significantly, increasing by $1.110 billion to reach $15.983 billion, the highest level since June 2022. However, reserves held by commercial banks dropped by $58 million, settling at $5.281 billion.
The boost in reserves was largely due to the $1.03 billion received as the first tranche of a $7 billion IMF loan package, which has enhanced Pakistan’s ability to meet its short-term financial obligations.
Positive Market Sentiment
Analysts from Tresmark, a financial terminal, noted in a client report that the improving foreign exchange reserves, coupled with a strengthening real effective exchange rate (REER) and declining import demand, are all positive indicators for the currency’s stability.
Remittances continue to play a crucial role in supporting the rupee, with recent SBP initiatives encouraging remittances through formal banking channels. These measures have made it more attractive to send money through official means rather than the grey market, resulting in a surge in remittances. September’s remittance figure is expected to approach the $3 billion mark, further supporting the rupee.
Exporters and Forward Sales
While the rupee has appreciated only slightly, analysts suggest that exporters are likely to restart forward sales as the rupee remains range-bound. The forward swap market also saw significant movement, with one-month swaps rising from 30 paisa to 170 paisa and three-month swaps increasing from 200 paisa to 370 paisa. This presents an opportunity for exporters to capitalize on a stable rupee within the next three months.
With strong dollar inflows and rising reserves, the rupee is expected to remain stable, providing a sense of relief for Pakistan’s economy amid global currency fluctuations.