Topline Securities, a brokerage firm, anticipates that the exchange ratebetween the Pakistani Rupee (PKR) and the US Dollar (USD) in the interbankmarket will likely fall within the range of Rs. 320-340 by June 2024. Intheir PKR outlook report, the brokerage firm noted that recent governmentactions have led to the PKR strengthening both in the official interbankmarket and the open market.
The report mentioned that since the caretaker government assumed control,the PKR faced pressure due to speculation that the non-political caretakeradministration might allow the currency to adjust in accordance withInternational Monetary Fund (IMF) directives. Consequently, the PKRexperienced a 6 percent decline in the interbank market (from Rs. 288 toRs. 307) and a 10 percent drop against the USD in the open market (from Rs.296 to Rs. 328) between August 14, 2023, and September 4, 2023.
It also highlighted that the recent surge in the USD value, post-August 14,primarily occurred in the open and black markets, leading to a premiumincrease (open market rate vs. interbank rate) from 1-2 percent to 6-7percent. In response to this trend, the caretaker government, incollaboration with the State Bank of Pakistan (SBP), implemented severalmeasures to curb demand in the open market.
Consequently, over the past 9 working days, the PKR has gained strength. Inthe interbank market, the PKR appreciated by 4 percent, rising from Rs. 307to Rs. 296 against the USD. Simultaneously, in the open market, the PKRincreased by 10 percent, going from Rs. 328 on September 4 to Rs. 298 as ofSeptember 18.
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Despite this recent recovery, the PKR has been one of thepoorest-performing currencies in recent years, with a 22 percent decline in2022 and a 23 percent decrease in 2023 so far against the USD. Factors suchas the external financing gap, challenging global financial markets, andlocal political instability have significantly impacted foreign exchangereserves, which currently provide less than 2 months of import cover,putting pressure on the rupee.
