Pakistani Rupee Set to Surge Against US Dollar: Analysts

The Pakistani Rupee is expected to appreciate by over Rs. 55 or 20 percent in the coming months, potentially reaching as high as 220 against the US Dollar from today’s level of 277.9/$.

Positive indicators, such as the real interest rate moving into positive territory for the first time in three years, are anticipated to reduce debt financing costs and alleviate forex pressure.

In a recent report, American multinational financial services company Goldman Sachs noted that positive interest rates could act as a catalyst for the PKR’s recovery, especially if inflation continues to decline.

An ex-senior central bank official, speaking anonymously, remarked that real interest rates could drive the Pakistani Rupee to the 220-230 range by early 2025.

With inflation on a downward trend, the likelihood of higher real positive interest rates in the future is enhanced.

The official also hinted at a potential key lending rate cut by the State Bank of Pakistan (SBP), further elevating the real positive rate and reducing the real cost of Pakistan’s debt financing.

However, there are mixed views on the rupee’s future trajectory.

While some anticipate double-digit gains fueled by disinflation and potential IMF support, others fear a worsening balance of payment crisis due to supply crunches in global oil markets.

Importers, in particular, are facing pressure, with the country’s import bill rising by almost 26 percent in March 2024.

Looking ahead, foreign factors are expected to continue influencing the PKR trend in 2024.

Pakistan’s dollar bonds are also forecasted to rise, contingent upon the coalition government’s adherence to potential IMF reforms.

These reforms may include raising fuel and electricity rates, a move that is met with both anticipation and apprehension.