Karachi, May 8, 2025 — The Pakistani rupee weakened slightly against the US dollar on Thursday, closing at PKR 281.52 per dollar, compared to the previous day’s closing rate of PKR 281.47 in the interbank foreign exchange market.
The marginal dip of 5 paisas comes amid rising political and military tensions between Pakistan and India, which have led to a cautious tone in the currency market.
Currency dealers and analysts noted that despite the geopolitical backdrop, dollar demand remained relatively subdued. This was primarily due to a slowdown in import activity and corporate dollar settlements. Additionally, inflows from overseas remittances and export proceeds were disappointingly low, limiting the availability of foreign exchange in the market and increasing pressure on the rupee.
Adding to the rupee’s vulnerability is the persistent decline in Pakistan’s foreign exchange reserves. According to the State Bank of Pakistan (SBP), reserves dropped by $184 million during the week ending April 25, 2025, falling to $15.252 billion from $15.436 billion the previous week. This continuous depletion has eroded the central bank’s capacity to defend the rupee in volatile conditions.
Another major concern is Pakistan’s widening trade deficit. Latest figures from the Pakistan Bureau of Statistics (PBS) show the trade gap ballooned by 55% in April 2025 compared to the same month last year. The deficit soared to $3.39 billion from $2.18 billion in April 2024 — the highest monthly shortfall in three years. This sharp increase has fueled higher dollar demand from importers, placing additional downward pressure on the rupee.
Despite these challenges, financial analysts believe there could be some near-term support for the rupee. Expected inflows from remittances and export earnings later this month may help relieve dollar shortages and offer brief stability to the exchange rate.
However, the longer-term outlook remains uncertain. Experts warn that without improvements in economic fundamentals — particularly in boosting reserves and narrowing the trade deficit — the Pakistani rupee will remain exposed to ongoing external shocks and elevated dollar demand. As tensions persist, the market is likely to stay on edge.