Karachi, August 18, 2024 – The Pakistani rupee is expected to maintain its stability against the US dollar in the coming week, buoyed by ample foreign exchange reserves and positive economic trends, according to analysts and currency dealers.
This week, the local currency exhibited a narrow trading range, closing at PKR 278.54 against the dollar on Friday. This slight appreciation follows a minor dip earlier in the week, highlighting the rupee’s resilience in a challenging economic environment.
A currency dealer attributed the rupee’s stability to the healthy foreign exchange reserves, which are primarily driven by robust remittances from overseas Pakistanis. These remittances have consistently hovered around $3 billion per month, providing a steady inflow of foreign currency and supporting the local currency’s value. The dealer noted that this influx has been a key factor in cushioning the rupee against potential volatility.
Furthermore, recent economic data has bolstered investor confidence. Pakistan’s debt-to-GDP ratio has declined to a six-year low of 70% in FY24, a development attributed to stronger GDP growth outpacing debt accumulation. This positive trend has also been reflected in the nation’s external debt, which has decreased from 32% to 26% of GDP during the same period. These improvements in economic indicators have contributed to a more favorable outlook for the rupee.
While the final approval for the International Monetary Fund (IMF) loan program is still pending, the government remains optimistic about securing it by the end of the month. Analysts believe that the IMF’s support will further enhance the country’s foreign exchange reserves and stabilize the currency market.
However, analysts also caution that the rupee’s stability could be influenced by political developments in the medium to long term, particularly in the run-up to the US elections in November. Political uncertainty, both domestically and internationally, could impact investor sentiment and, in turn, the exchange rate.
Despite these factors, the overall outlook for the rupee remains positive. The potential for further appreciation is supported by expectations of declining interest rates and increased forward booking activity by exporters. These developments are anticipated to provide additional support to the local currency in the near future.
The sustained stability of the rupee is seen as a positive indicator for Pakistan’s economy, fostering investor confidence and supporting economic growth. Analysts suggest that if current trends continue, the rupee could experience a period of relative calm in the currency markets, providing much-needed stability for businesses and consumers alike.
