Rupee Slightly Weakens to PKR 277.68 on Higher Import Demand

The Pakistani rupee faced minor depreciation against the US dollar on October 28, 2024, closing at PKR 277.68 in the interbank market. This marks a slight dip from last Friday’s rate of PKR 277.64, driven largely by a surge in demand for import payments at the start of the week.

Currency experts attribute this minor decline to an increased demand for the dollar as businesses fulfill their import-related obligations. Monday’s dip, though minimal, reflects the ongoing pressure on the rupee due to Pakistan’s import needs, which often intensify at the start of each week. Despite this fluctuation, analysts maintain a positive outlook, noting that recent improvements in foreign inflows and an uptick in the State Bank of Pakistan’s (SBP) foreign exchange reserves are favorable signs for the rupee’s stability in the medium term.

As of October 18, 2024, the SBP reported a modest increase of $18 million in its foreign exchange reserves, bringing the total to approximately $11.014 billion. Although this rise may appear incremental, it provides a degree of resilience for Pakistan in managing external payments. The reserves act as a cushion amid economic challenges, helping stabilize the currency by covering import payments and external debt obligations. This steady increase in reserves has mitigated some of the recent declines in reserves held by commercial banks, providing support against currency pressures and fostering confidence in Pakistan’s fiscal stability.

Additionally, analysts highlight positive developments in Pakistan’s broader economy that have improved the rupee’s standing. A narrowing trade balance and healthier current account deficit have reduced the need for foreign currency to cover external payments. The lower current account deficit, reflecting a decline in the disparity between Pakistan’s imports and exports, is a favorable trend for the rupee, creating a more sustainable balance in trade and bolstering investor sentiment. These fiscal improvements suggest that Pakistan is moving toward a more stable financial position, helping ease pressures on the rupee.

Overseas remittances and rising export revenues are also essential factors supporting the rupee. Remittances from Pakistanis abroad remain a critical source of foreign exchange, enhancing the country’s economic resilience and aiding in stabilizing the currency. The recent uptick in export revenues further bolsters the rupee, complementing the inflow of remittances and supporting economic and market stability. As these revenue streams strengthen, they contribute to a more favorable economic outlook, which has helped mitigate the rupee’s decline.

While the rupee’s dip on Monday reflects the currency’s sensitivity to import demand, experts remain optimistic about its stability moving forward. Many anticipate that the combination of growing foreign exchange reserves, a narrowed trade deficit, and steady remittances will continue to offer support for the rupee in the coming months. This outlook aligns with the government’s broader economic initiatives aimed at stabilizing the rupee by bolstering foreign reserves and promoting export-led growth.

Monday’s decline, though small, underscores the ongoing challenges Pakistan faces in managing currency stability amid fluctuating global conditions and external obligations. Yet, with improving economic indicators and strengthened foreign exchange reserves, Pakistan appears better equipped to address these pressures. This resilience, driven by a blend of strategic financial measures and positive economic trends, suggests the rupee is on a path to greater stability against the dollar, provided that the underlying macroeconomic factors remain favorable.