Karachi, March 6, 2024 – On Wednesday, the Pakistani Rupee experienced a decline, reaching PKR 279.35 against the US Dollar in the interbank foreign exchange market.
The rupee depreciated by PKR 0.04 compared to the previous day’s closing rate of PKR 279.31, with currency market analysts attributing the drop to heightened demand for the US Dollar driven by import requirements and corporate payments.
The surge in demand has exerted pressure on the local currency, exacerbating its downward trend. Analysts also point to a reduction in foreign exchange reserves as a contributing factor to the depreciation of the Pakistani Rupee against the greenback.
As of the week ending February 23, 2024, Pakistan’s total exchange reserves amounted to $13.039 billion, reflecting a decrease from the previous week’s figure of $13.098 billion (February 16, 2024). Economic analysts express concern over the diminishing reserves, viewing them as a significant factor influencing the weakening of the rupee.
While acknowledging the decline in reserves and the subsequent depreciation, it is crucial to contextualize these figures. Despite the decrease, the current reserves remain higher than those observed in August 2021, a challenging period for Pakistan’s economy marked by a widening current account deficit, inflationary pressures, and global uncertainty due to the COVID-19 pandemic.
During August 2021, Pakistan negotiated with the International Monetary Fund (IMF) to secure a bailout package, aiming to ensure financial stability. Comparing the current economic situation to that of August 2021 highlights the resilience of Pakistan’s economy in the face of evolving circumstances. Despite persisting challenges, the nation has made progress in addressing economic vulnerabilities and establishing a more stable financial environment.
Market observers stress the importance of close monitoring and management of the balance between imports and exports, coupled with prudent fiscal policies, to mitigate the impact of external factors on the exchange rate. Policymakers are expected to concentrate on bolstering foreign exchange reserves to enhance the country’s capacity to withstand economic shocks.
The interventions and monetary policy decisions of the Central Bank will likely play a crucial role in stabilizing the currency and addressing concerns related to foreign exchange reserves. Past resilience, combined with proactive measures, could contribute to restoring confidence in the economy and maintaining a stable currency in the months ahead. Investors and stakeholders are advised to remain vigilant and informed as the economic landscape continues to evolve.
