Karachi, December 13, 2023 – The US Dollar experienced a decline against the Pakistani Rupee on Wednesday, weakening by PKR 0.17 at the closing of the interbank foreign exchange market.
The currency market concluded with the US Dollar priced at PKR 283.61, down from the previous day’s closing of PKR 283.78 in the interbank foreign exchange market.
Market analysts are attributing the strengthening of the Pakistani Rupee against the US Dollar to a stable monetary policy. The State Bank of Pakistan (SBP) had announced a day earlier that it would maintain the benchmark policy rate at 22 percent. This decision seems to have bolstered confidence in the local currency.
Additionally, experts point to the introduction of Sharia-compliant bonds in the stock market as a contributing factor to the strengthening of the Pakistani Rupee. Positive sentiments in the currency market have played a role in these recent gains.
While the currency market reflects positive developments, concerns persist regarding a significant setback in the country’s foreign exchange reserves, as reported by the State Bank of Pakistan (SBP). The demand for the US Dollar remains high, driven by import and corporate payments, especially in the final month of 2023.
Despite the recent gains in the currency market, the revelation by the SBP of a substantial decline in foreign exchange reserves for the week ending December 1, 2023, has raised alarms. The reserves dwindled from $12.373 billion on November 24, 2023, to $12.107 billion, marking a noteworthy decrease. This decline becomes even more pronounced when compared to the peak levels observed in August 2021 when Pakistan’s reserves reached $27.2 billion.
Currency analysts emphasize the critical role foreign exchange reserves play in supporting currency stability and meeting international financial commitments. The decline in reserves may be attributed to factors such as increased imports, debt repayments, and other external financial pressures. Addressing the root causes of this decline is crucial for ensuring the country’s economic stability.
While positive economic indicators contributed to recent gains in the Pakistani Rupee, the ongoing threat posed by diminishing foreign exchange reserves cannot be ignored. This situation highlights the need for prompt and effective measures from the government and financial authorities to stabilize the foreign exchange situation.
Experts advocate for a multifaceted approach, emphasizing the importance of boosting exports, attracting foreign investments, and reducing the trade deficit to alleviate pressure on foreign exchange reserves. The government’s exploration of such avenues, coupled with close monitoring of economic indicators, will be vital in restoring investor confidence and ensuring long-term stability in Pakistan’s currency markets.
As the global economic landscape continues to evolve, countries like Pakistan must remain vigilant and proactive in managing their economic fundamentals. The development and implementation of sound economic policies are paramount to navigating challenges posed by external economic factors, ultimately contributing to the stability and resilience of the Pakistani economy.
