Karachi, October 24, 2024 – The Pakistani rupee dipped slightly against the U.S. dollar on Thursday, weakening by 11 paisas to close at PKR 277.84 in the interbank market, down from the previous day’s PKR 277.73. This modest depreciation was largely driven by heightened demand for dollars to meet rising foreign payment obligations, including import payments and corporate transactions.
Currency market analysts have highlighted that the recent decline in the rupee’s value is a direct result of increased external payments. The demand for foreign currency has intensified as businesses settle international transactions and imports. Despite the depreciation, market experts maintain a positive outlook for the rupee’s medium-term stability, buoyed by recent improvements in Pakistan’s foreign exchange reserves and a narrowing current account deficit.
According to data from the State Bank of Pakistan (SBP), the country’s foreign reserves increased by $64 million during the week ending October 10, 2024. This brings total reserves to $16.111 billion, compared to $16.047 billion the previous week. The SBP’s own reserves saw a notable jump, rising by $215 million, from $10.808 billion to $11.023 billion. This uptick in reserves has been well-received by financial analysts, who view the improved reserves as a crucial buffer against external economic pressures.
“The increase in reserves provides a cushion against external shocks, reducing the need for foreign borrowing and boosting market confidence in the rupee’s prospects,” commented a senior financial analyst. The strengthened reserve position is seen as a sign of resilience, indicating that Pakistan is better positioned to navigate external challenges and manage foreign payment pressures.
Alongside the positive reserve developments, other economic indicators have been supportive of the rupee’s stability. Notably, Pakistan’s trade balance and current account deficit have been on a narrowing trend, leading to reduced demand for foreign currency to finance international payments. A smaller deficit means less pressure on the exchange rate, helping stabilize the rupee against the dollar.
Furthermore, steady inflows of remittances from overseas Pakistanis and rising export growth have continued to support the local currency. These inflows have played a pivotal role in bolstering Pakistan’s external account, adding to the pool of foreign exchange and contributing to a more favorable economic environment. The ongoing strength in remittances, coupled with improvements in export performance, has helped alleviate some of the pressures facing the rupee.
Despite the positive trends, analysts caution that the rupee may experience short-term fluctuations due to the periodic pressures of meeting foreign payments. However, they emphasize that the underlying strength in the form of stronger reserves, improved trade balance, and robust remittance flows will help the rupee remain resilient over the medium term.
Overall, the outlook for the rupee remains optimistic, supported by recent economic improvements that have enhanced market confidence in Pakistan’s financial stability. The currency’s performance in the coming months will continue to be shaped by a mix of domestic factors and global market conditions, but the recent strengthening of foreign reserves offers a key stabilizing influence. As Pakistan navigates these dynamics, the focus remains on maintaining economic resilience and ensuring the rupee’s continued stability amidst evolving challenges.