Karachi, October 21, 2024 – The Pakistani rupee weakened by 8 paisas against the US dollar on Monday, closing at PKR 277.69 compared to Friday’s closing of PKR 277.61 in the interbank foreign exchange market. The depreciation comes as the demand for dollars surged due to foreign payments, particularly for imports and corporate obligations, putting pressure on the local currency.
Currency analysts observed that the beginning of the week typically sees higher dollar demand as businesses settle international payments. This increased demand contributed to the slight drop in the rupee’s value. Despite this depreciation, financial experts remain optimistic about the rupee’s outlook in the short term, pointing to positive economic developments.
The optimism stems largely from an improvement in Pakistan’s foreign exchange reserves, which have seen a modest increase. According to the latest report by the State Bank of Pakistan (SBP), the nation’s net foreign reserves grew by $64 million in the week ending October 10, 2024. Pakistan’s total foreign exchange reserves now stand at $16.111 billion, up from $16.047 billion the previous week.
The bulk of this improvement comes from the SBP’s holdings, which increased by $215 million, rising from $10.808 billion to $11.023 billion. This growth in reserves is viewed as a positive sign for Pakistan’s economy, providing a stronger financial buffer against external economic challenges and reducing the country’s reliance on foreign borrowing.
Financial experts have welcomed the increase in reserves, noting that it offers much-needed relief to the rupee, which has faced significant pressure in recent months due to economic instability. “The rise in reserves is a crucial step toward stabilizing the rupee,” said a senior financial expert. “With a stronger reserve position, Pakistan is in a better place to manage external economic shocks, which will enhance market confidence in the rupee’s performance.”
In addition to rising reserves, Pakistan’s improving trade balance and current account deficit are also contributing factors to the rupee’s stability. Both deficits have narrowed in recent months, reducing the pressure on foreign exchange reserves by minimizing the need for foreign currency to cover international payments.
Other positive indicators, such as steady inflows from workers’ remittances and a rise in export growth, have further supported the rupee. These combined factors, along with the growing forex reserves and narrowing deficits, provide a promising outlook for the rupee’s stability in the near future, despite the short-term fluctuations.