Karachi, August 27, 2024 – The Pakistani rupee recorded its second consecutive gain against the US dollar on Tuesday, closing at PKR 278.32 in the interbank foreign exchange market.
This marks an improvement of 10 paisas from the previous day’s closing rate of PKR 278.42. Last Friday, the rupee had closed at PKR 278.50 to the dollar.
Currency analysts attribute this appreciation to a rise in Pakistan’s foreign exchange reserves and a reduction in the current account deficit. The strengthening of the rupee reflects a steady inflow of foreign exchange into the country, bolstering market confidence and stabilizing the currency.
According to the State Bank of Pakistan (SBP), foreign exchange reserves increased slightly to $14.67 billion as of August 16, 2024, up by $22 million from the previous week’s reserves of $14.645 billion on August 9, 2024. Analysts noted that this rise was driven by improved export receipts and stronger remittances from overseas Pakistanis. These inflows have been crucial in strengthening the balance of payments, providing much-needed support to the rupee.
Breaking down the figures, the SBP’s own foreign exchange reserves rose by $19 million, bringing the total to $9.292 billion as of August 16, 2024, up from $9.273 billion recorded the previous week. Reserves held by commercial banks also saw a marginal increase, rising by $3 million to end the week at $5.375 billion, compared to $5.372 billion a week earlier.
The rupee’s appreciation comes as a welcome relief for Pakistan’s economy, which has been grappling with high inflation and external pressures. A stronger rupee helps to ease inflationary pressures by reducing the cost of imported goods, which is particularly important for a country that relies heavily on imports for energy and other essential commodities. Additionally, it signals increased investor confidence and a more stable economic environment, which could attract further foreign investments.
Currency experts have also highlighted the reduction in the current account deficit as a positive development for the rupee. The narrowing of the deficit indicates that Pakistan is successfully managing its foreign exchange outflows, a key concern for policymakers. The combination of improved reserves and a lower current account deficit has created a more favorable outlook for the rupee in the near term.
Looking ahead, analysts suggest that maintaining vigilance in managing external accounts and sustaining foreign inflows will be crucial for preserving the rupee’s stability. As the government implements reforms and seeks to enhance exports and remittances, the rupee is expected to remain on a steady path, provided global economic conditions remain supportive.
