Karachi, September 2, 2024 – The Pakistani rupee weakened by 10 paisas against the US dollar on Monday, closing at PKR 278.64 in the interbank foreign exchange market. This depreciation marks a slight dip from its last closing of PKR 278.54 on Friday, August 30, 2024.
Currency analysts have attributed this decline to the increased demand for the dollar on the first trading day of the week, a common trend following the weekend. They noted that such fluctuations are typical at the start of the week when demand for foreign currency usually peaks.
Despite this slight dip, market analysts remain optimistic about the rupee’s stability in the near term. This confidence is bolstered by a recent rise in Pakistan’s foreign exchange reserves and several positive economic indicators. They predict that the rupee will continue to trade within its current range over the coming weeks, underpinned by a steady inflow of foreign currency and improved investor sentiment.
The State Bank of Pakistan (SBP) reported a modest increase in foreign exchange reserves, which rose by $112 million to reach $9.403 billion as of August 23, 2024. This uptick has been viewed positively by market participants and has contributed to the stabilization of the rupee.
Adding to the optimism, Moody’s recently upgraded Pakistan’s credit rating to Caa2, citing enhanced macroeconomic conditions and improved government liquidity and external positions. This upgrade reflects the positive impact of a 37-month Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF), which was reached at a staff level on July 12, 2024. The agreement has helped bolster investor confidence and is expected to provide further support to the country’s economic stability.
Pakistan is also awaiting final approval from the IMF’s executive board for a new $7 billion loan program, which could further strengthen the nation’s financial position. However, this approval has been delayed due to the pending confirmation of debt rollovers and the need to bridge the country’s external financing gap. In addition to the IMF loan, Pakistan is seeking approximately $4 billion in loans from Middle Eastern banks, while negotiations for a continuation of Saudi Arabia’s oil financing facility are ongoing.
In a strategic move, Saudi Arabia has proposed an offer related to the Reko Diq mining project, which could ease the debt rollover process and secure additional financing for Pakistan. If accepted, this offer could play a significant role in stabilizing the country’s finances and supporting the rupee.
As the market navigates these developments, analysts expect the rupee to maintain its current trajectory, buoyed by these favorable economic trends and external support.
