For the sixth consecutive day, the Pakistani rupee demonstrated strength against the US Dollar in the interbank market, opening at 282. By 11:30 PM, it stabilized, reaching a peak of 282, marking an intraday gain of approximately Rs. 1 against the greenback. The interbank rate held at 282 and later settled at the 283 level for the rest of the day, while open market rates fluctuated between 282 and 284.
Closing on a positive note, the Pakistani rupee appreciated by 0.07 percent, concluding at 283.01 after a gain of 20 paisas against the dollar. This marks the sixth consecutive day of the rupee closing higher. On a year-to-date basis, the rupee has witnessed a depreciation of 19.99 percent, while on a fiscal year-to-date basis, it has appreciated by 1.05 percent.
Overall, since January 2023, the rupee has seen a decline of nearly Rs. 65, and since April 2022, it has depreciated by over Rs. 112 against the US Dollar. On the day in focus, the PKR gained 20 paisas against the dollar.
The World Bank has projected a decrease in remittance flows to Pakistan, estimating $24 billion in 2023 and a further decline to below $22 billion with a 10 percent drop in 2024. The World Bank attributes this decline to the economic turmoil, driven by a balance of payment crisis and high debt, causing a loss of public confidence and a shift of remittances from formal to informal channels.
The sharp depreciation of the rupee between early 2022 and early 2023, coupled with the government’s efforts to control capital outflows through import and capital controls, has diverted remittance inflows from formal channels, leading to foreign currency shortages.
Responding to the World Bank’s forecast for the Pakistani rupee, traders expressed concerns about the potential impact on the interbank economy. They highlighted that a decline in remittances could occur alongside rupee devaluation, affecting the amount received by expatriates. For instance, if an expat remits Rs. 100,000 at a rate of 283/$ today and the PKR depreciates to 300/$ in March 2024, they would send $333 instead of $354, resulting in a financial hit and potential implications for daily pay orders.
In summary, while the Pakistani rupee has exhibited short-term strength against the US Dollar, concerns loom over the potential impact of decreasing remittance flows on the country’s economy, as highlighted by the World Bank’s projections and insights from traders.
