The Pakistani rupee showed resilience despite a minor dip against the US dollar in the interbank foreign exchange market on Monday, December 16, 2024. The rupee closed at PKR 278.17, a marginal decline of 5 paisas from Friday’s rate of PKR 278.12. The overall outlook for the currency remains stable, backed by improving economic indicators and sustained inflows from remittances and exports.
Currency analysts attributed the slight downward pressure on the rupee to heightened dollar demand at the start of the trading week. However, the impact of this demand surge was mitigated by inflows from export receipts and workers’ remittances, which played a crucial role in maintaining stability.
Market experts emphasized that Pakistan’s strengthened foreign exchange reserves have bolstered the rupee’s stability. The State Bank of Pakistan (SBP) reported an increase of $13 million in reserves, which rose to $12.051 billion for the week ending December 6, 2024. This represents a modest improvement over the previous week’s figure of $12.038 billion, signaling growing confidence in the country’s currency market.
A key factor underpinning the rupee’s resilience has been the robust growth in remittances from overseas Pakistanis. During the first five months of the current fiscal year (July to November 2024-25), home remittances surged by an impressive 34% year-on-year. Total inflows reached $14.77 billion compared to $11.05 billion during the same period last year. This sharp increase underscores the critical role remittances play in stabilizing Pakistan’s economy by providing essential foreign exchange inflows that alleviate external financial pressures.
In addition to remittances, government measures to restrict non-essential imports have eased pressure on the balance of payments. These measures, combined with rising remittance flows, have contributed to the rupee’s temporary stability. However, experts caution that sustainable currency stability will require more than short-term fixes. Comprehensive economic reforms are necessary to address underlying structural challenges.
Analysts have called for reforms aimed at boosting industrial productivity, diversifying export markets, and reducing reliance on short-term external borrowing. They also noted that while current measures have provided relief, rising economic activity and demand for imported raw materials could renew pressure on the rupee in the medium term. Structural adjustments in the economy will be essential to maintaining long-term currency stability and fostering sustainable economic growth.
Looking ahead, experts remain cautiously optimistic about the rupee’s short-term trajectory. While improvements in foreign exchange reserves and remittance inflows provide a buffer, the road to sustainable stability will require coordinated efforts to enhance Pakistan’s economic fundamentals. For the rupee to maintain its current resilience, policy consistency and strategic economic planning will be key.
As 2024 draws to a close, the rupee’s performance serves as a reminder of the complex interplay between external inflows, domestic policies, and global economic conditions. Pakistan’s ability to navigate these challenges effectively will determine the future trajectory of its currency and broader economic prospects.