Karachi, August 29, 2024 – The Pakistani rupee faced renewed pressure on Thursday, succumbing to a 19-paisa decline against the US dollar. The weakening currency was primarily attributed to a surge in foreign payment demands, which outpaced inflows, highlighting the ongoing challenges faced by the country’s economy.
In the interbank foreign exchange market, the rupee closed at PKR 278.64 against the dollar, marking a downward trajectory from the previous day’s closing of PKR 278.45. Currency experts attributed this depreciation to the heightened demand for dollars to settle import bills, a reflection of the country’s reliance on imports.
Despite this short-term setback, analysts remain cautiously optimistic about the rupee’s future prospects. They point to several factors, including an improvement in Pakistan’s foreign exchange reserves and a narrowing current account deficit, as reasons for their confidence. These positive trends are expected to provide a stabilizing influence on the currency.
Recent data from the State Bank of Pakistan (SBP) supports this optimism. As of August 16, 2024, the country’s foreign exchange reserves stood at $14.67 billion, a slight increase from the previous week’s level of $14.645 billion. This growth was primarily driven by stronger export receipts and remittances from overseas Pakistanis, which have been instrumental in bolstering the balance of payments.
A breakdown of the reserves reveals that the SBP’s own foreign exchange reserves rose by $19 million to $9.292 billion during the week ending August 16. Meanwhile, commercial banks saw a modest increase of $3 million in their foreign exchange holdings, bringing the total to $5.375 billion.
Market participants believe that the rupee is likely to maintain its current level in the coming days due to these positive developments in the balance of payments. The increased foreign reserves and narrowing current account deficit are expected to provide a buffer against excessive depreciation pressures. However, they also caution that unforeseen external shocks or policy changes could still pose risks to the currency’s stability.
As the Pakistani economy continues to navigate these challenges, the rupee’s performance will remain a key indicator of the country’s economic health.
