The rupee has appreciated by 0.84% against the dollar since the beginning of 2024, reflecting improved macroeconomic conditions.
- The rupee closed at 279.41 against the dollar this week.
- A slight easing in inflation also received some support.
- “Improving economic conditions will have a positive impact on the rupee.”
KARACHI: The Pakistani rupee is expected to maintain some resilience against the dollar in the coming weeks, supported by improving economic fundamentals and a positive trade balance. news It was reported on Sunday, citing currency dealers.
The following week, the local currency ended the week at $279.41 to the dollar, as exports rose 27% and the January trade deficit narrowed by 30% compared to the same month last year. , slightly higher than the previous week’s price of $279.59. Imports decreased by %.
“This signals an improvement in the external trade sector and will help the rupee maintain some resilience against the dollar,” said a currency dealer.
The rupee received some support from a slight easing in inflation, with the year-on-year rate in January falling to 28.34% from 29.66% in December. However, on a monthly basis, inflation remains high, rising 1.8% in January, higher than the average of 1.5% over the past three months.
The average inflation rate for the first seven months of the current financial year was 28.73%, while the average inflation rate for the corresponding months of the previous fiscal year was 25.40%.
The State Bank of Pakistan (SBP) has kept its policy interest rate unchanged at 22% next week, citing inflation risks.
However, the rupee has weakened by 0.84% against the dollar since the start of 2024, reflecting improved macroeconomic conditions such as increased liquidity in the foreign exchange market, shrinking money supply, and a balance of payments surplus due to low interest rates. It rose by 2.36 rupees. import demand.
Zafar Paracha, Director-General of Exchange Companies Association of Pakistan (ECAP), said the improving economic situation has had a positive impact on the health of the rupee and if current policies continue to be implemented, the rupee will show further strength in the future. He said he expected it to be possible. several weeks.
However, some analysts believe the rupee will be under pressure from the upcoming general elections scheduled for February 8 and low foreign exchange reserves of $13.3 billion as of January 26, enough to cover less than three months. He warns that he may face. of imported goods.
“Next week’s economic watch will be very boring as all eyes are on how the (Pakistani) elections will turn out,” financial market research firm Tresmark said in a report.
“Pakistan’s low growth is another challenge affecting the post-inflationary economy. Reforms are needed and some global factors could hit Pakistan the hardest.”
According to the World Bank, Pakistan’s GDP growth is expected to recover to 1.7% in fiscal 2024 after contracting by 0.6% in the previous year, but structural constraints and low investment continue to shorten potential growth. It is expected to fall below. GDP in FY2025 is expected to grow by 2.3%.
The World Bank also expects remittances, Pakistan’s main source of foreign exchange, to fall by 10% year-on-year to below $22 billion in 2024.
The report highlighted the risks of a prolonged economic slowdown, weak investment, weak exports and increased poverty without reforms.
The rupee has also been weighed down by the US Federal Reserve’s decision to forgo interest rate cuts in March, which could reduce liquidity and weigh on stock markets, and a potential deflationary shock from a meltdown in China’s real estate market. There is a possibility that it will be affected by the world situation. said the report.
The price of Brent crude, which Pakistan imports to meet its energy needs, is expected to be in the range of $70 to $80 per barrel, but exceeding that level would hurt the global economy, especially Pakistan. That’s a possibility, Torresmarkside said.
It added that geopolitical uncertainty could also impact the rupee as tensions between rival countries could increase uncertainty and commodity prices.