Pakistani rupee sees further gain against dollar

KARACHI: The Pakistani rupee has consistently shown remarkable resilience despite the geopolitical turmoil on its southwest border with Iran, further bolstering against the US dollar in interbank market.

The local currency has appreciated against the US dollar in the interbank exchange, reaching Rs279.90 paise at the close of business on Friday. The dollar has lost 8 paise in value compared to Thursday.

One of the factors that has supported the rupee’s strength is the continued inflow of foreign exchange from international lenders. In January 2024, the International Monetary Fund (IMF) released the second tranche of $705.6 million under the $3 billion Stand-By Arrangement (SBA) that was approved in July 2023. The SBA is aimed at supporting Pakistan’s economic stabilization program and addressing its balance of payments crisis.

Another factor that has eased the pressure on Pakistan’s foreign exchange reserves is the rollover of a $2 billion loan by the United Arab Emirates (UAE) for another year.

The loan was due to mature in January 2024, but the UAE agreed to extend it for one more year after a formal request from Pakistan. The loan was part of a $6.2 billion financial assistance package that the UAE had pledged to Pakistan in 2019.

These developments have boosted the confidence of the market and the investors, who have shown optimism about the prospects of the Pakistani economy.

However, some challenges remain, such as the rising inflation, the fiscal deficit, and the structural reforms that are required under the IMF programme. The rupee’s performance in the coming months will depend on how the government manages these issues and maintains the stability of the exchange rate.