Pakistan's foreign exchange reserves received a $500 million boost from the Asian Development Bank (ADB) under its Climate Change and Disaster Resilience Enhancement Programme (CDREP). This inflow, expected to be reflected in the State Bank of Pakistan's reserves by the end of November 2024, offers much-needed stability amid ongoing currency fluctuations.
The Pakistani rupee has remained range-bound, closing at Rs277.96 against the US dollar on Thursday, reflecting a marginal depreciation. Experts attribute the rupee's movement to internal and external factors, including political developments and remittance inflows. The ADB loan provides a significant cushion for the country's financial reserves, which is critical as Pakistan grapples with external shocks and internal challenges.
Meanwhile, gold prices in Pakistan dropped again, this time by Rs700 to Rs275,200 per tola (11.66 grams) on Thursday, aligning with international trends. According to the All Pakistan Sarafa Gems and Jewellers Association, this decline followed fluctuations in global rates, which initially dropped by $7 before rebounding after slowing US inflation data boosted expectations of a Federal Reserve rate cut next month.
Adnan Agar, Director of Interactive Commodities, attributed the decline to reduced market activity during the US Thanksgiving holidays. "In Pakistan, the market will close at 12 AM (midnight between Thursday and Friday) due to the US market break; otherwise, it typically closes at 3 AM Pakistan time. The market operates 21 hours daily, opening at 6 AM in Pakistan, while internationally, it only takes a 30-minute closure," he explained. "Normal activity is expected to resume tomorrow, with regular trading returning on Monday as the US holidays conclude."
Globally, spot gold rose 0.4% to $2,645.67 per ounce (31.10 grams), while US gold futures gained 0.2% to $2,644.80. Agar noted that gold remains bullish, having gained nearly $100 earlier in the week, although local prices have fallen by Rs11,700 per tola since hitting an all-time high of Rs287,900 in late October.
The rupee also continued its marginal slide for the third consecutive day, closing at Rs278.04 in the interbank market. In the open market, the Exchange Companies Association of Pakistan (ECAP) reported a day-to-day depreciation of Rs0.3, with the currency ending at Rs277.43 per dollar. Analysts including Shankar Talreja, Research Head at Topline Securities, noted that the rupee's free-float regime leaves it susceptible to inflows and outflows. October 2024 saw inflows of $3.1 billion, marking a notable improvement.
The State Bank of Pakistan (SBP) reported total liquid foreign reserves of $16.07 billion as of November 22, 2024, with $11.4 billion held by the SBP and $4.6 billion by commercial banks. This total will further increase when the ADB inflow is officially reflected in next week's data release.
Additionally, Pakistan's stock market reached a historic milestone, with the Pakistan Stock Exchange (PSX) crossing the 100,000-point mark for the first time. Analysts at JS Global attributed this rally to improved investor sentiment, supported by declining interest rates and lower inflation, which have enhanced the appeal of equities for higher returns.
Amid these economic developments, concerns linger over currency stability. "The rupee has remained stable against the dollar for about a year," Agar said. "However, calling it strong would be an overstatement. While appreciation has occurred incrementally, depreciation has often been in double digits, sometimes reaching as high as Rs100 in one instance."
Talreja expressed cautious optimism, citing improved financial inflows and investor confidence, but pointed out the need for structural reforms to maintain long-term economic stability.
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