Rupee soars to 12-month high

Closes at Rs279.90/$ on signing of $3b UAE investment agreement

KARACHI:

In a notable trend, the Pakistani currency continues its upward trajectory for the third consecutive working day, reaching a new 12-month high below the crucial level of Rs280 against the US dollar in the interbank market on Friday. The State Bank of Pakistan’s (SBP) data reveals a 0.03% enhancement, with the currency closing at Rs279.90 against the greenback. Over the past four-and-a-half months, the currency has cumulatively surged by 9.72%, marking a significant recovery from the all-time low of Rs307.10/$ in the first week of September 2023.

This surge coincides with the signing of an agreement by the UAE to invest $3 billion in Pakistan’s trade infrastructure, focusing on ports and railways. Additionally, Caretaker Finance Minister Dr Shamshad Akhtar has announced Pakistan’s upcoming negotiations with the IMF for the final tranche of $1.1 billion, part of the ongoing $3 billion loan programme.

Read Rupee closes below Rs280/$ after a year

The commitment from the UAE and expected IMF inflows signal an optimistic outlook for the Pakistani rupee. Tresmark, a treasury firm, has forecasted a continued gradual upward rally for the rupee, projecting a potential rise to Rs77 against the greenback in the coming weeks.

Anticipating increased demand for foreign currency in the domestic economy, the government contemplates easing import restrictions on raw materials to stimulate economic activities. However, Exchange Companies Association of Pakistan (ECAP) reports a fresh downward trend in the open market, with a 0.08% or Rs0.23 decrease on a day-to-day basis, closing at Rs280.98/$.

This downward trend indicates relatively higher demand for the US dollar, particularly for individual transactions related to Umrah and Haj purposes. In previous developments, Pakistan received multilateral and bilateral inflows totalling around $6 billion in the first half (Jul-Dec) of the current fiscal year 2023-24, surpassing the $4 billion recorded in the same period of the prior fiscal year (FY23).

Published in The Express Tribune, January 20^th, 2024.

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