Karachi, September 3, 2024 — The Pakistani rupee continued its downward trend, depreciating by another 6 paisas against the US dollar on Tuesday. It closed at PKR 278.60 in the interbank foreign exchange market, down from PKR 278.64 the previous day. This marks the second consecutive decline in the rupee’s value.
Currency analysts attributed this latest slide to rising demand for import payments, which has placed additional pressure on the rupee. Despite a 14% growth in exports for the first two months of the current fiscal year, traders seemed to disregard these positive developments, focusing instead on the increased demand for foreign currency to settle import bills.
Despite the slight dip, market analysts remain optimistic about the rupee’s stability in the near term. They suggest that the recent depreciation is a temporary adjustment rather than the start of a prolonged downtrend. This confidence is reinforced by several positive economic indicators, including an increase in Pakistan’s foreign exchange reserves and improved investor sentiment.
The State Bank of Pakistan (SBP) reported a modest increase in foreign exchange reserves, which rose by $112 million to reach $9.403 billion as of August 23, 2024. This uptick has been welcomed by market participants, who see it as a sign of stability. The increased reserves provide a buffer against external shocks and help maintain the value of the rupee.
Further bolstering confidence, Moody’s recently upgraded Pakistan’s credit rating to Caa2. The rating agency cited improved macroeconomic conditions and better government liquidity and external positions as key factors for the upgrade. This positive outlook is partly due to the 37-month Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF), which was reached at a staff level on July 12, 2024. The agreement has been a significant factor in enhancing investor confidence, and it is expected to contribute to the country’s economic stability in the coming months.
Pakistan is also awaiting final approval from the IMF’s executive board for a new $7 billion loan program. The approval has been delayed due to pending confirmations of debt rollovers and the need to bridge the country’s external financing gap. In addition to the IMF loan, Pakistan is seeking approximately $4 billion in loans from Middle Eastern banks. Negotiations are also underway for a continuation of Saudi Arabia’s oil financing facility, which would provide further support to Pakistan’s financial position.
Looking ahead, market analysts believe that the rupee will continue to trade within its current range over the coming weeks, supported by steady inflows of foreign currency and improved investor sentiment. The government’s efforts to secure additional financing and the positive outlook from international credit rating agencies are expected to contribute to the stability of the rupee in the near future.
