KARACHI: The Pakistani rupee is under pressure amid rising imports, Haj-related outflows and a slowdown in export receipts, but it is not expected to undergo sharp depreciation, likely closing between 282.5 and 283 against the dollar next month, analysts said.
The rupee has been experiencing a gradual depreciation, which has intensified in recent weeks. This week, the local currency crossed the 282 per dollar mark in the interbank market for the first time in 18 months, although it closed at 281.97 to the dollar on Friday.
“This gradual depreciation is on the back of rising imports and potentially due to USD buying by the central bank to meet its reserves target, we believe,” said Topline Securities in a brief note.
According to a report by Tresmark, a financial terminal, several factors are contributing to the recent weakness of the rupee. These include a surge in defence-related spending, outflows related to the Haj, and backlog clearance following the reopening of the Afghan border. Furthermore, the central bank’s decision to allow some swaps to mature without rolling them over through sell-buy arrangements is weakening both spot rates and swap premiums, adding further pressure on the local currency.
The report highlights other contributing factors, such as currency recalibration after US President Donald Trump’s tariffs, a slowdown in export proceeds due to delays and occasional cancellations of export orders, and the State Bank of Pakistan’s (SBP) swap book showing $400 million in buybacks over the past four months, all of which have contributed to the rupee’s depreciation against the dollar.
“These factors disrupted the inflow-outflow equilibrium, leaving banks short in their NOPs [net open positions], delaying LC [letters of credit] retirements, and pushing the open market rate to 284 per $,” the report said.
“The market remains short on dollars but is not anticipating sharp movement. Tresmark projects June to close between 282.5 and 283,” it said.
“Looking ahead, budget documents reflect a parity assumption of Rs290 per $, implying a possible range of 283 to 297 in FY26. A high of 297 per USD implies a 5.5 per cent depreciation, aligning with the rupee’s historical average of 6.0 per cent per annum,” it added.
Interestingly, the rupee’s decline is occurring despite the disbursement of a $1 billion tranche from the International Monetary Fund as part of a $7 billion loan programme and an additional $1.4 billion approved for climate resilience financing. The SBP’s foreign exchange reserves rose to a four-month high of $11.45 billion as of May 16. Additionally, Eurobonds and credit default swaps (CDS) have stabilised.
The rupee is weakening, despite Eidul Azha-related remittance flows being expected to resume, and Pakistan is on track to report its first current account surplus in decades in the fiscal year 2025.
