Karachi, February 23, 2025 – Financial experts are forecasting that the Pakistani rupee will likely experience a boost in the upcoming week, driven by an increase in foreign inflows associated with the holy month of Ramadan. Historically, the month of Ramadan has seen a rise in remittances from overseas Pakistanis, providing much-needed support to the local currency.
This past week, the Pakistani rupee saw a slight decline in the interbank market. It closed at 279.27 against the US dollar on Monday, and weakened further to 279.57 by the end of the week. However, analysts anticipate that the rupee will stabilize just under the 280 mark in the coming week, as Ramadan-related inflows are expected to offer some relief.
A report from Tresmark explained that while the depreciation of regional currencies such as the Indian rupee, Turkish lira, and Bangladeshi taka, along with concerns surrounding new tariff structures, present challenges for the Pakistani rupee, the currency is likely to experience a gradual depreciation of around 5-10 paisas per week. Despite this, improved liquidity conditions in the market could offset these declines, offering support to the rupee.
The report also mentioned that banks have been struggling with a shortfall in dollar liquidity over the last two weeks. This has led to delays in even small-scale imports. Under normal circumstances, such liquidity issues would have placed additional pressure on the rupee, but the market has shown a consistent appetite for buying dollars at lower levels, helping to maintain stable forward premiums for one-month and longer tenures.
Further data also points to the State Bank of Pakistan (SBP)’s short swap book dipping below $3 billion as of December 2024, reinforcing the trend of buying dollars during dips in the market to support the rupee. However, despite these challenges, Pakistan’s foreign exchange reserves are expected to receive a boost from upcoming International Monetary Fund (IMF) disbursements. These funds will likely provide additional stability for the rupee in the coming weeks.
One of the key factors contributing to the overall economic outlook is the recent shift in Pakistan’s current account balance. In January, Pakistan’s current account slipped into a deficit of $420 million, reversing a $474 million surplus recorded in December. The increase in imports of goods and a decline in services exports were the primary drivers of this shift, exacerbating the country’s trade imbalance.
As of February 14, 2025, Pakistan’s foreign exchange reserves held by the SBP stood at $11.2 billion. While this is enough to cover just over two months of imports, the upcoming IMF disbursements are expected to further bolster the reserves, providing crucial support for the rupee.
A significant milestone in this regard is the visit of an IMF mission to Islamabad scheduled for February 24 to 28, 2025. The mission will discuss a $1 billion climate financing package for Pakistan under the IMF’s Resilience and Sustainability Trust. In addition, a mid-March review of Pakistan’s $7 billion loan program could unlock another $1 billion tranche, further strengthening the rupee and stabilizing Pakistan’s economic outlook.
In conclusion, while the Pakistani rupee faces ongoing challenges related to liquidity shortages and a widening trade deficit, experts believe that Ramadan-related inflows and international financial support will provide temporary relief, helping to stabilize the currency and maintain market confidence in the short term.