The Pakistani rupee (PKR) experienced a marginal decline of 3 paisas against the US dollar on Friday, January 24, 2025, ending the day at PKR 278.75 to the dollar. This decline follows a closing rate of PKR 278.72 the previous day, reflecting a slight depreciation. The minor dip in the rupee’s value is attributed to a rise in demand for foreign currency, particularly due to increased import payments and corporate transactions, which typically surge towards the end of the trading week.
Currency experts noted that the rupee’s depreciation was largely driven by the pressure of external payments, with both imports and corporate settlements increasing demand for dollars. This uptick in demand, coupled with Pakistan’s strained foreign exchange reserves, contributed to the rupee’s decline. In recent weeks, the country’s foreign exchange reserves have come under pressure, further exacerbating the situation. As of January 17, 2025, the State Bank of Pakistan (SBP) reported a decline of $262 million in foreign reserves, with the total net reserves standing at $16.189 billion, compared to $16.451 billion the previous week.
This drop in reserves is significant, considering the broader economic challenges Pakistan faces. The country’s foreign exchange reserves have been a key factor in determining the rupee’s stability. The increasing demand for dollars due to external payment obligations, combined with these declining reserves, has contributed to the rupee’s marginal slide against the greenback.
Despite the short-term pressures on the rupee, analysts remain optimistic about Pakistan’s economic outlook. A positive development is Pakistan’s improving balance of payments, which has shown considerable improvement in recent months. For the first half of fiscal year 2024-25 (July-December 2024), Pakistan posted a current account surplus of $1.21 billion. This represents a dramatic recovery from the $1.40 billion deficit recorded during the same period in the previous fiscal year. The current surplus is a positive sign, indicating that the country is making strides in addressing structural imbalances in its economy, and it is expected to provide some stability to the rupee going forward.
One of the key factors contributing to this positive shift is the surge in remittance inflows from overseas Pakistanis. These remittances have played a vital role in bolstering Pakistan’s foreign reserves and mitigating external pressures on the currency. In the first half of FY2024-25, remittances grew by 38%, totaling $17.85 billion, compared to $13.44 billion during the same period last year. This increase in remittances has provided a much-needed cushion to Pakistan’s foreign reserves, helping to ease some of the challenges caused by external payment obligations and global economic volatility.
Furthermore, the inflow of remittances is expected to continue providing strong support to the economy in the coming months. This steady source of foreign currency is likely to help stabilize the rupee, despite short-term fluctuations caused by external pressures. As a result, while the rupee faced slight depreciation on Friday, the longer-term outlook for the currency remains positive due to the improvements in Pakistan’s external accounts and the ongoing support from remittance inflows.
In conclusion, while the Pakistani rupee faced marginal pressure on Friday, the country’s improving balance of payments and substantial remittance growth offer a solid buffer against future volatility. These positive economic indicators are likely to provide stability to the currency and support Pakistan’s broader economic recovery. As the country continues to address its structural imbalances and attract foreign investment, the outlook for the rupee is expected to improve in the long run.