Pakistani Rupee Expected to Remain Stable in 2024-25

Karachi Unlike the previous fiscal year, the rupee-dollar exchange rate is expected to stay stable in 2024-25.

On Thursday, the Pakistani rupee lost only nine paise against the US dollar in the interbank market.

Currency dealers in banks attribute this stability to a small current account deficit, which shrank to $202 million in the first 10 months of FY24, compared to $3.92 billion in the same period last year.

At the start of FY24, the exchange rate was very unstable, with the rupee dropping to Rs306 against the dollar in early July 2023.

Dealers pointed out that the State Bank of Pakistan’s foreign exchange reserves, around $9 billion, also play a crucial role in stabilizing the exchange rate. However, some experts note that these reserves might seem weak given the $8 billion debt repayments due in the first two months of FY25.

Experts predict exchange rate stability for the next fiscal year.

“Atif Ahmed, a currency dealer, believes an anticipated IMF loan deal would greatly support the market and stabilize the exchange rate.”

Most analysts think the current exchange rate is being managed with the IMF’s consent, ensuring it remains stable. Previously, the IMF was highly critical of the State Bank’s exchange rate management.

“Since the government is strictly following IMF’s guidelines to increase revenue, without considering the economic growth and its negative effects on trade and industry, there’s optimism for the next loan package,” said Amir Aziz, an exporter in Karachi.

According to the State Bank, the dollar closed at Rs278.60, slightly up from Rs278.51 before Eid holidays.

The open market was active due to high inflows during Eid, with exchange companies maintaining a Rs3 difference between the selling and buying rates. The dollar’s selling and buying rates were Rs280.32 and Rs277.61, respectively.

Exchange companies reported high inflows in June, similar to May, when they sold $450 million to banks, expecting the same for June.

The exchange rate has been stable for the past four months, with only minor fluctuations.

State Bank Reserves Increase
The State Bank’s foreign exchange reserves rose by $31 million to $9.134 billion in the week ending June 14. This increase, without new inflows, indicates that the central bank has been buying dollars from the interbank market. The country’s total foreign exchange reserves were $14.414 billion, including $5.279 billion held by commercial banks.