The Pakistani rupee experienced a minor dip against the US dollar at the start of the trading week, reaching PKR 277.79 in the interbank market on Monday—a modest depreciation of 9 paisa from the previous close of PKR 277.70. Analysts attribute this slight decline to increased demand for the dollar, primarily driven by foreign payments from importers and corporations.
Despite the slight depreciation, analysts are optimistic about the rupee’s medium-term outlook, as several positive economic indicators suggest a favorable environment for the currency. According to recent data from the State Bank of Pakistan (SBP), foreign exchange reserves rose by $32 million, bringing the total reserves to $16.049 billion as of October 25, 2024. This increase, bolstered by a $115 million gain in SBP’s official reserves, has eased some pressure on Pakistan’s balance of payments, contributing to a more stable economic landscape.
Trade data from the Pakistan Bureau of Statistics (PBS) further supports the rupee’s outlook, with the trade deficit contracting by 5.59% in the first four months of FY2024-25 (July-October). The deficit narrowed to $6.97 billion from $7.39 billion in the same period last year, reflecting strong export performance coupled with moderated import growth. These positive trade figures have injected a degree of confidence into the market, supporting the rupee’s resilience despite fluctuations.
Exports during this period surged by 13.45% year-on-year, reaching $10.88 billion compared to $9.59 billion in the same period last year. This growth has been largely attributed to rising demand in Pakistan’s key export markets, helping to counterbalance a moderate 5.17% increase in imports, which totaled $17.85 billion. The trade balance improvement suggests a healthier flow of dollar inflows, a factor that has strengthened the rupee and improved its outlook for the coming months.
Market experts suggest that if current trends continue, the rupee could find further support in the market. Enhanced export revenue, narrowing trade deficits, and a steady influx of foreign exchange reserves signal a cautiously optimistic forecast for the rupee’s stability. Dollar inflows from exports and remittances, combined with controlled imports, are key contributors to this supportive environment for the rupee amid Pakistan’s ongoing economic recovery.
“The recent data indicates that the rupee may hold its ground in the near term,” commented a currency analyst. “With rising reserves and positive trade data, the outlook for Pakistan’s currency appears stable, as long as we see a continuation of strong exports and manageable import levels.”
The stability of the rupee in the coming months will likely depend on several factors, including sustained improvements in trade, a healthy level of forex reserves, and strategic monetary policy decisions by the SBP. As Pakistan implements economic reforms and manages its external obligations, these factors will play a critical role in bolstering the rupee’s position amid both domestic and international challenges.
Overall, while the rupee has seen a slight dip, Pakistan’s currency is showing signs of resilience. With supportive economic indicators, including an improving trade balance and rising forex reserves, analysts are cautiously optimistic about the rupee’s potential to stabilize, provided that these trends persist in the months ahead.