In a remarkable display of resilience and economic recovery, the Pakistani rupee has surged, appreciating by 1.4 percent against the US dollar in the interbank market throughout the outgoing week. As it stands, the rupee is poised to claim the title of the best-performing currency for this month. By the close of business on Thursday, the dollar was valued at Rs287.74, marking a
1.4 percent decrease from the previous week, where it had been at Rs291.76, according to the State Bank of Pakistan.
The journey of the Pakistani rupee in recent times has been nothing short of extraordinary. Just a few weeks ago, on September 5th, it had hit a historic low, trading at 307.1 against the dollar. However, a swift and determined response from the country’s financial regulatory authorities and security agencies set in motion a remarkable turnaround.
The crackdown on black market operators involved in informal currency trading led to a substantial influx of tens of millions of dollars back into Pakistan’s interbank and open markets, according to dealers. As a result, the local currency has witnessed impressive gains, recording an increase of approximately 6.1 percent.
The finance ministry, in its monthly report, credited the government’s resolute administrative actions against illegal foreign exchange dealers and hoarders in commodity markets for stabilizing the exchange rate. This stabilization has not only provided relief from imported inflation but has also eased commodity prices.
Before the crackdown, the dollar was commanding a staggering Rs332 in the open market. The positive trend continued as the open market saw the dollar depreciate to Rs288.5 on Thursday, according to the Exchange Companies Association of Pakistan (ECAP).
While the recent performance of the Pakistani rupee is undeniably impressive, experts caution against overlooking the sharp depreciation it experienced in the preceding period. In recent years, Pakistan’s currency has been one of the poorest performers.
Fahad Rauf, Head of Research at Ismail Iqbal Securities, highlighted the need for continued efforts to attract foreign direct investment (FDI) into export-oriented sectors to sustain the positive trajectory of the rupee. He emphasized that while the rupee’s recent performance is commendable, it should be viewed in the context of its recent struggles.
Samiullah Tariq, the head of research and development at Pak-Kuwait Investment Company, expressed optimism about the strengthening rupee but underscored the importance of consistent inflows in the coming months to solidify the PKR’s position. He noted that despite the changing sentiments, the rupee remains weaker year-on-year.
Mohammed Sohail, CEO of Topline Securities, anticipated further strengthening of the rupee in the short term due to regulatory actions. However, he cautioned that the medium-term fate of the currency hinges on economic fundamentals, particularly foreign exchange reserves and the outcome of the IMF loan review scheduled for November.
The remarkable turnaround of the Pakistani rupee is a testament to the country’s commitment to economic stability and growth. While the recent performance is encouraging, it is essential to maintain a forward-looking perspective and continue working on policies that attract investment and reinforce the currency’s resilience.