Karachi, January 29, 2025 – The Pakistani rupee made a modest recovery against the US dollar on Wednesday, gaining 6 paisas in the interbank foreign exchange market. The local currency ended the day at PKR 278.87, compared to the previous day’s close of PKR 278.93, offering a slight but encouraging sign of stability after experiencing declines over the past three consecutive sessions.
The recent uptick in the rupee’s value is attributed to a boost in foreign inflows, which provided some much-needed relief to the Pakistani currency. Experts closely monitoring the currency market point out that these inflows have helped cushion the rupee’s position, providing temporary relief from the pressure of rising import payments. However, despite the recovery, analysts caution that the overall economic pressure remains, and sustaining these gains in the long run is uncertain.
In recent weeks, the rupee has faced significant downward pressure due to a range of challenges. One of the key factors contributing to the currency’s depreciation has been the strain on Pakistan’s foreign exchange reserves. According to data from the State Bank of Pakistan (SBP), the country’s foreign exchange reserves experienced a sharp decline of $262 million during the week ending January 17, 2025. This reduction brought total net reserves down from $16.451 billion to $16.189 billion, further highlighting the vulnerability of the Pakistani currency in the face of mounting financial pressures.
A major cause of the reserve depletion is the heightened demand for foreign currency required to meet Pakistan’s import payments and corporate obligations. These growing demands have exerted additional stress on the rupee, limiting its ability to maintain strength. Consequently, the volatility in the currency market has been exacerbated, as businesses and individuals scramble for US dollars amid a tightening supply.
Despite these short-term challenges, there are reasons for cautious optimism surrounding Pakistan’s economic outlook. One such reason is the improvement in the country’s balance of payments. During the first half of the fiscal year 2024-25 (July-December 2024), Pakistan reported a current account surplus of $1.21 billion, which marks a significant turnaround from the $1.40 billion deficit recorded during the same period in the previous year. This improvement in the current account suggests that Pakistan is making progress in addressing some of its long-standing structural economic issues. Analysts believe this development could lead to increased investor confidence in the country’s economy, which may, in turn, provide further support for the rupee.
Another key factor contributing to a more positive outlook for Pakistan’s economy is the surge in remittance inflows. Overseas Pakistanis have continued to send significant amounts of money back to their home country, with remittances for the first half of FY2024-25 totaling $17.85 billion, a notable 38% increase from the $13.44 billion recorded during the same period the previous year. These remittances have been crucial in stabilizing Pakistan’s foreign exchange reserves and providing critical support to the local currency. As global economic uncertainties continue to loom, remittance inflows have proven to be a valuable cushion, helping to alleviate some of the pressure on Pakistan’s economy and offering hope for the rupee’s long-term stability.
In conclusion, while the recent 6 paisa recovery in the rupee’s value is a positive development, Pakistan’s economy still faces significant challenges. The country’s foreign exchange reserves remain under pressure, and the demand for US dollars continues to outstrip supply. However, the improvement in the current account balance and the surge in remittance inflows provide some cause for optimism, suggesting that with continued reforms and external support, the rupee may find a path to greater stability in the future.