Karachi, March 9, 2025 – The Pakistani rupee (PKR) continued its gradual decline in the inter-bank market for another week, depreciating by Re0.30 or 0.11%. The local currency ended the week at 279.97 against the US dollar, compared to the previous week’s closing of 279.67, according to data from the State Bank of Pakistan (SBP).
This steady depreciation of the rupee is being closely observed by financial analysts, who attribute the currency’s ongoing downturn to various economic pressures and external factors. One significant development that may be influencing the rupee’s movement is the recent data on Pakistan’s inflation rate and trade balance.
Inflation in Pakistan showed a noticeable decline in February 2025, with the year-on-year inflation rate dropping to 1.5%. This is lower than the 2.4% recorded in January 2025, according to the Pakistan Bureau of Statistics (PBS). While this drop in inflation could suggest some economic relief, the country is still grappling with other challenges, notably its trade deficit.
Pakistan’s trade deficit widened significantly in February 2025, soaring by over 33% to $2.3 billion compared to the same month in the previous year. This increase in the trade gap is a troubling sign, as the country’s trade balance continues to reflect a persistent imbalance between exports and imports. In February 2024, Pakistan’s trade deficit stood at $1.72 billion, highlighting the growing pressure on the local currency.
Despite these challenges, there is some positive news regarding Pakistan’s engagement with the International Monetary Fund (IMF). Bloomberg reported that Pakistan is likely to successfully pass the first review of its $7 billion Extended Fund Facility (EFF) with the IMF. According to officials and diplomats familiar with the matter, the country has made sufficient progress in increasing revenue, which is seen as a key factor in meeting the IMF’s conditions for the program.
On a more positive note, Pakistan’s foreign exchange reserves showed slight improvement, with the SBP’s reserves increasing by $27 million on a weekly basis, reaching $11.25 billion as of February 28, 2025. However, total liquid foreign reserves, which include both the central bank’s reserves and those held by commercial banks, stood at $15.87 billion. Net foreign reserves held by commercial banks were reported at $4.62 billion.
In the open market, the PKR continued to experience volatility. The rupee lost 12 paise for buying and 17 paise for selling against the US dollar, closing at 279.25 and 281.47, respectively. The PKR also depreciated against other major currencies. Against the Euro, it lost 11.65 rupees for buying and 11.69 rupees for selling, closing at 301.60 and 304.66, respectively. Similarly, the PKR lost value against the UAE Dirham and Saudi Riyal, closing at 76.11 and 76.70, and 74.40 and 75.00, respectively.
The ongoing depreciation of the rupee comes amid mixed economic indicators. While inflation has eased and foreign reserves showed slight growth, Pakistan’s trade deficit and the global economic environment continue to put pressure on the currency. Analysts will be watching closely as the SBP’s monetary policy decisions and the country’s engagement with the IMF will likely play a significant role in determining the rupee’s future trajectory in the coming weeks.