Karachi, March 9, 2025 – The Pakistani rupee is expected to maintain its stable trading pattern against the US dollar in the upcoming week, with analysts anticipating minimal movement unless influenced by significant external factors. Market participants are closely monitoring the upcoming monetary policy meeting of the State Bank of Pakistan (SBP), scheduled for Monday, to gain insights into the future trajectory of the rupee.
As of the end of last week, the Pakistani rupee closed at 279.97 per dollar in the interbank market, marking a slight depreciation from its previous rate of 279.77 recorded on Tuesday. The dip in the rupee’s value comes after a brief lull in trading activity, caused by Monday’s bank holiday in observance of Zakat deductions, which further limited market movement at the beginning of the week.
Traders in the market believe that the rupee’s movement will primarily be dictated by the supply and demand dynamics for US dollars in the open market. Many expect the rupee to remain within its current range, likely holding steady and avoiding a sharp fall below the 279 mark. Analysts point out that the SBP’s upcoming decision regarding interest rates will play a critical role in shaping the currency’s outlook in the near term.
Financial analysts suggest that real interest rates in Pakistan have already surpassed 10%, which has intensified calls for a rate cut. Current inflation forecasts predict an average rate of 3.75% until June 2025 and 4.9% until December 2025. However, core inflation remains elevated, hovering around 8.0%, posing ongoing challenges for the central bank in managing inflationary pressures.
Additionally, the recent decline in global energy prices, particularly Brent crude, which fell to $69.3 per barrel—the lowest in three years—has had an indirect impact on the rupee-dollar dynamics. While lower energy prices should help ease inflationary pressures to some extent, they are unlikely to significantly influence the SBP’s monetary policy stance. Analysts suggest that recent trade flows and bond auctions signal that the SBP is likely to maintain its current interest rates, rather than opting for a further cut.
Despite a relatively stable financial environment in recent months, Pakistan’s economic fundamentals remain concerning. Issues such as the lack of structural reforms, limited tax base expansion, and stalled privatization of state-owned entities continue to challenge the country’s fiscal health. Investor confidence remains fragile, compounded by the ongoing International Monetary Fund (IMF) review, which has added a layer of caution to market sentiment.
Moreover, Pakistan’s foreign exchange reserves have been steadily declining, with the latest current account figures indicating a deficit. This growing imbalance highlights the need for the SBP to keep interest rates attractive in order to stabilize the rupee and prevent further depreciation. However, analysts caution that halting rate cuts or maintaining high rates could push yields higher by 25-40 basis points, potentially undermining efforts to foster sustainable economic growth.
A recent market survey by Tresmark revealed a divided outlook among market participants regarding future interest rate cuts. While 58% of survey respondents predict a 100-basis-point cut, others believe the central bank will maintain its current policy stance. This mixed sentiment underscores the challenges faced by the SBP as it strives to balance economic growth with financial stability.
As the SBP prepares to unveil its decision, all eyes are on the central bank’s monetary policy meeting. The outcome will not only influence the future movement of the rupee but also signal the central bank’s approach to managing Pakistan’s broader economic challenges. In the coming days, the stability of the rupee will be closely tied to the central bank’s actions, external market conditions, and investor confidence in Pakistan’s fiscal and economic outlook.