The Pakistani rupee is expected to remain range-bound against the US dollar in the coming week as the country faces ongoing challenges in securing foreign inflows.
Analysts suggest that declining foreign exchange reserves could put pressure on rupee stability. However, strong remittances and export receipts may provide some support to the local currency.
During this week’s interbank market activity, the rupee initially stood at 278.83 against the dollar on Monday. However, it faced minor depreciation and ended at 278.97 on Thursday before recovering slightly to close at 278.94 on Friday. The rupee’s performance reflects the delicate balance between external inflows and outflows.
A recent report by Tresmark highlighted that both the Indian and Bangladeshi currencies have weakened, adding to regional currency market volatility. Meanwhile, Pakistan’s foreign exchange reserves have been depleting, with January’s import bill projected to surpass $5 billion. Additionally, outflows from special convertible rupee accounts, including bonds and equities, have exceeded $58 million in the first 17 days of this year. Rising premiums suggest increased forward selling activity from exporters, which may affect the rupee’s short-term performance.
While the rupee is likely to hover within a narrow range, analysts predict that it may test the 280 mark this month. Forecasts indicate that the rupee could breach 278 and trade around 279.25 against the dollar in the coming week. There is also a possibility of the rupee slipping to 281 in the first quarter of 2025 if external financial pressures persist.
Pakistan’s foreign reserves held by the central bank dropped by $76 million to $11.372 billion as of January 24, primarily due to sluggish financial inflows and mounting external debt repayments. Overall, the country’s total forex reserves declined by $137 million to $16.052 billion, while reserves of commercial banks dipped by $61 million to $4.680 billion.
According to the State Bank of Pakistan (SBP), of the $26.1 billion in external debt repayments for FY25, a net amount of $10 billion remains payable after adjustments for rollovers and refinancing. So far, $6.4 billion has been repaid, leaving $3.6 billion due for the rest of the fiscal year. Expected inflows from commercial banks and bilateral sources in the second half of FY25 are anticipated to counterbalance outflows, preventing additional pressure on rupee reserves.
With Pakistan requiring $100 billion in short- to medium-term financing, remaining within the International Monetary Fund (IMF) programme is essential to maintaining financial stability, according to Minister of State for Finance Ali Pervaiz Malik.
