Karachi, May 7, 2025 — The Pakistani rupee recorded another depreciation on Wednesday, closing at PKR 281.47 against the US dollar in the interbank foreign exchange market. The latest figure reflects a 10-paisa drop from the previous day’s rate of PKR 281.37, continuing the downward trend observed in recent sessions.
This weakening of the rupee has raised fresh concerns among economic analysts and market participants. The depreciation is being attributed to a combination of geopolitical tensions and internal economic challenges that have collectively undermined investor confidence and increased pressure on Pakistan’s currency.
One of the most prominent triggers for this decline is the rising regional instability following recent Indian airstrikes in Pakistan. The escalation of hostilities has unsettled financial markets, leading to a flight to safety and an increased demand for the US dollar, which is traditionally viewed as a secure asset during times of uncertainty. This surge in demand for the greenback has, in turn, exerted downward pressure on the rupee.
In parallel, Pakistan’s foreign exchange reserves continue to dwindle, limiting the central bank’s ability to stabilize the currency. According to figures released by the State Bank of Pakistan (SBP), the country’s reserves fell by $184 million during the week ending April 25, 2025. The total now stands at $15.252 billion, compared to $15.436 billion the week before. This steady decline not only signals a fragile external sector but also hampers the SBP’s capacity to intervene effectively in currency markets.
Further compounding the rupee’s challenges is the country’s expanding trade deficit. Recent data from the Pakistan Bureau of Statistics (PBS) shows that the trade gap widened sharply in April 2025. Compared to April 2024, the deficit increased by 55 percent, reaching $3.39 billion, up from $2.18 billion. This marks the largest monthly trade imbalance in three years. The sharp increase has been attributed to rising import volumes coupled with relatively stagnant export performance. The resulting surge in dollar demand by importers has intensified the pressure on the rupee.
Despite these negative indicators, some financial experts remain cautiously optimistic about a potential short-term recovery in the rupee’s value. They point to anticipated inflows from overseas Pakistani workers through remittances and expected export proceeds that could help alleviate the pressure on the currency. These foreign exchange inflows may temporarily bolster the rupee by improving dollar liquidity in the market.
Nevertheless, the broader outlook remains uncertain. Analysts emphasize that without fundamental improvements to the economy—particularly through increased reserves, structural reforms, and trade balance corrections—the rupee will likely remain under stress. Persistent external shocks, combined with sustained domestic dollar demand, are expected to keep the rupee on a volatile path.
In the absence of meaningful policy measures, the rupee’s trajectory will continue to reflect the country’s economic vulnerabilities and susceptibility to global market movements.