Rupee Slides Further Against Dollar Amid Rising Import Payments

The Pakistani rupee continued its depreciation against the US dollar in the interbank foreign exchange market on Thursday, dropping by 6 paisas to close at PKR 278.23. This decline marks the rupee’s third consecutive loss, following its previous close of PKR 278.17.

Currency market experts attribute the ongoing pressure on the rupee to heightened demand for the dollar, driven by increased import payments and corporate settlements as the year-end approaches on December 31, 2024. Despite these challenges, analysts remain cautiously optimistic that strong inflows from exports and worker remittances could provide a stabilizing effect in the near term.

The State Bank of Pakistan (SBP) recently reported significant growth in remittances, a key contributor to stabilizing the rupee and supporting the domestic economy. In the first five months of the current fiscal year (July–November 2024-25), remittances surged by 34% year-on-year, reaching $14.77 billion compared to $11.05 billion during the same period last year. This notable increase highlights the unwavering support of overseas Pakistanis, who continue to play a vital role in bolstering the country’s economic resilience amid global uncertainties.

In addition to remittance inflows, Pakistan’s foreign exchange reserves have shown encouraging improvements. As of November 29, 2024, the country’s reserves stood at $16.62 billion, reflecting a weekly rise of $544 million. This boost was largely attributed to a $500 million inflow from the Asian Development Bank (ADB). The SBP’s reserves also grew significantly, increasing by $619 million to reach $12.038 billion, up from $11.419 billion recorded the previous week.

Market experts maintain a cautiously optimistic outlook for the rupee in the short term. A combination of increasing remittances and government efforts to curb non-essential imports has helped ease pressure on the balance of payments, providing some stability to the local currency. However, structural reforms are emphasized as crucial for ensuring long-term resilience.

These reforms include enhancing industrial productivity, expanding export markets, and reducing reliance on short-term external borrowing. By addressing these structural issues, Pakistan can lay a stronger economic foundation, protect the rupee from further volatility, and safeguard the country against external economic shocks.

While the rupee’s performance remains under scrutiny, the combination of robust remittance inflows, improved foreign exchange reserves, and strategic economic measures offers a glimmer of hope for stability in the months ahead.