Karachi, May 26, 2024 – The Pakistani Rupee is expected to remain stable against the US dollar in the lead-up to the presentation of the Budget 2024-25, scheduled for next month. This forecast comes amid slight fluctuations observed in the interbank market this week.
On Monday, the rupee was valued at 278.29 against the dollar, but it saw a modest increase, closing at 278.21 by Friday. This stability, albeit minor, is seen as a positive sign ahead of the crucial budget announcement.
Financial experts attribute this stability to recent efforts aimed at boosting the economy. However, they caution that these measures might eventually increase the demand for imports, thereby exerting pressure on the external front. “While the rupee is stable now, we anticipate a monthly depreciation of Rs2-3 per dollar starting in July,” remarked a financial analyst.
There is a consensus among experts that the rupee is currently marginally overvalued. They argue that without existing import and capital restrictions, the currency would likely be lower. This viewpoint is supported by a recent report from the International Monetary Fund (IMF), which also suggests that the rupee is overvalued.
Comparatively, Pakistan’s export-to-GDP ratio is one of the lowest when juxtaposed with countries like Vietnam, Thailand, India, and Bangladesh. Experts argue that a competitive devaluation could help spur export growth. Similarly, the import-to-GDP ratio in Pakistan is low, hinting that productivity, rather than currency value, might be the underlying issue. Thus, a gradual and consistent depreciation of the rupee might be necessary to address these economic challenges.
Market analysts are closely monitoring the rupee’s performance, especially in the context of Pakistan potentially securing a new bailout package from the IMF. A staff-level agreement with the IMF is anticipated in July, which could provide further clarity on the rupee’s trajectory.
As the budget presentation approaches, the stability of the rupee against the dollar will be a key focus for policymakers and market participants alike, with broader economic implications for Pakistan’s financial health and international trade dynamics.
