Goldman Sachs Group Inc. has expressed concerns about the recent surge inthe Pakistani rupee, suggesting that these gains may be short-lived.Despite the Pakistani rupee’s impressive performance on the global stage inthe past two months, Goldman Sachs is skeptical about its sustainabilitydue to the country’s financing risks.
Initially, the rupee had experienced a significant decline, reaching ahistoric low of 307 to the US dollar in early September. However, it hassince rebounded by more than 8%, now trading at 280 to the dollar. Thisremarkable recovery ranks as the largest increase among all worldcurrencies over the last month, primarily attributed to the government’scrackdown on illegal dollar trading.
Nevertheless, Goldman analysts, led by Kamakshya Trivedi, have issued acautionary outlook on the Pakistani rupee’s recent appreciation. They pointto rising interest costs faced by Pakistan and the absence of long-termagreements with the International Monetary Fund (IMF) and bilateralfinancing to stabilize the country’s external balance.
This instability is amplified by concerns among investors about politicaluncertainty in Pakistan and potential governmental changes followingupcoming elections, prompting them to invest in the Pakistani rupee withhopes of future gains.
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This increased demand for Pakistani rupees has resulted in its strengthenedvalue against other currencies, potentially leading to higher costs forpurchasing foreign currency-denominated goods and services. The reportwarns that this trend is likely to persist as the elections approach,potentially causing further price increases.
Goldman Sachs further anticipates that the Pakistani rupee may face futuredevaluation due to the country’s financial challenges, includingdifficulties in meeting debt obligations and maintaining economic stability.