The Pakistani rupee continued its descent against the US dollar on Friday, May 9, 2025, reflecting ongoing macroeconomic challenges and regional instability. The currency depreciated by 19 paisas, closing at PKR 281.71 in the interbank market, down from the previous day’s PKR 281.52. The weakening of the rupee comes despite a modest uptick in the country’s foreign exchange reserves, signaling deeper structural pressures on the economy.
Market experts point to a combination of factors driving the rupee’s continued weakness, with escalating geopolitical tensions between Pakistan and India at the forefront. This regional uncertainty has heightened market anxiety and discouraged investor confidence, contributing to the depreciation of the local currency.
The State Bank of Pakistan (SBP) recently reported a $231 million increase in foreign exchange reserves, bringing the total to $15.483 billion as of May 2, 2025. While this rise in reserves would typically provide some cushion for the rupee, it has failed to reverse the downward trend. The reserves had stood at $15.252 billion just a week earlier, yet the rupee has shown no signs of stabilization.
One of the most significant contributors to the rupee’s depreciation has been the marked decline in worker remittances. According to the SBP, remittances fell sharply by 21% on a month-on-month basis in April 2025, dropping to $3.18 billion from $4.05 billion in March. This substantial dip has led to a reduction in the overall foreign exchange liquidity, thereby increasing the demand for dollars in the local market.
Compounding the pressure is the growing trade deficit. Data released by the Pakistan Bureau of Statistics (PBS) indicates that the trade deficit for April 2025 surged by 55% year-on-year, reaching $3.39 billion. This is the largest monthly trade shortfall Pakistan has witnessed in the past three years. The widening gap between imports and exports has spurred a renewed wave of dollar buying by importers, further amplifying demand for the greenback and pushing the rupee lower.
Even though import payments have slowed and corporate demand for dollars has remained relatively subdued, the persistent shortage of foreign exchange continues to weigh heavily on the rupee. Market analysts caution that unless there is a meaningful recovery in remittance inflows and a reduction in the trade deficit, the rupee is unlikely to find relief in the near term.
Experts emphasize the need for coordinated policy efforts between the government and the central bank to restore stability. Measures such as incentivizing export growth, regulating non-essential imports, and encouraging remittance flows through formal banking channels could help ease the pressure on the currency.
As the rupee struggles against mounting headwinds, the focus now shifts to how policymakers respond to these economic challenges and whether upcoming fiscal and monetary strategies can deliver the support the currency so urgently needs.