Karachi, December 26, 2023: In a surprising turn of events, the Pakistani Rupee (PKR) managed to make a marginal gain of PKR 0.16 against the US Dollar on Tuesday, closing at PKR 282.37 compared to the previous closing rate of PKR 282.53 on December 22, 2023, in the interbank foreign exchange market.
Currency analysts have noted the resilience of the local currency despite an increased demand for the greenback due to import and corporate payments. The market witnessed heightened dollar demand following weekly and public holidays, but the Rupee held its ground, with foreign inflows contributing to its stability.
This nominal gain becomes particularly noteworthy in light of recent concerns over Pakistan’s foreign exchange reserves. Official data reveals a substantial decline of $138 million in foreign exchange reserves within a week, primarily attributed to external debt repayment. As of the week ending December 15, 2023, the country’s total foreign exchange reserves stand at $12.068 billion, down from $12.206 billion recorded just a week earlier by the end of December 8, 2023. This decline raises alarms within economic circles and poses a tangible threat to the nation’s balance of payment capacity.
Despite challenges posed by increased dollar demand for imports and corporate payments, the Rupee has demonstrated remarkable resilience. This resilience is underpinned by positive economic indicators signaling a more stable financial landscape. A significant factor contributing to the Rupee’s strength is the substantial contraction in the Current Account Deficit (CAD).
In the first five months (July – November) of the fiscal year 2023-24, Pakistan experienced an impressive 64.46 percent reduction in its CAD, amounting to $1.16 billion. This starkly contrasts with the $3.26 billion recorded during the corresponding period in the previous fiscal year. Analysts attribute this substantial decline to a marked reduction in the trade deficit, indicating positive trends in the country’s economic performance.
The ability of the Rupee to gain ground against the dollar amidst falling foreign exchange reserves showcases the complex interplay of various economic factors. While external debt repayment and declining reserves present challenges, positive indicators such as the reduced CAD and a more favorable trade balance signal a potentially robust economic outlook.
Economic experts and policymakers will be closely monitoring these developments as they assess the impact of external factors on Pakistan’s economic stability. The resilience of the Rupee against adverse conditions serves as a testament to the underlying strengths of the nation’s economic fundamentals, offering a glimmer of hope amid the challenges faced by the country.
