Rupee expected to remain stable next week

KARACHI: The rupee is projected to remain stable in the coming week due to adequate dollar supplies, supported by a persistent rise in foreign exchange reserves, according to currency dealers.

This week, the local unit in the interbank market saw a slight fluctuation. Monday’s closing value was 277.64 per dollar, but on Thursday it lost ground and closed at 277.79. The rupee did, however, close at 277.63 to the dollar on Friday.

“The rupee is expected to move within its current range next week as market demand appears to be met by dollar liquidity,” a currency dealer said.

Pakistan’s foreign exchange reserves held by the central bank rose by $106 million to $10.808 billion as of October 4.

Remittances from Pakistanis working abroad increased by 29 per cent year-on-year (YoY) to $2.8 billion in September. These inflows stood at $8.8 billion in July-September FY25, a 39 per cent increase from a year ago.

According to a weekly report from Tresmark, the rupee is range-bound, but swap premiums are volatile. One and three months premiums are trading at sorry levels of 65 and 220 paisas respectively. This eliminates any chances of exporters booking forwards to lock in a premium.

“From the exporters’ point of view, the probability of the rupee weakening before year end has also dimmed,” it said.

“If there was a time when the government could have weakened the rupee to trigger growth, it was last week, when the IMF deal was done and inflation was at a multi-year low, instead they have opted to control the parity at the same levels,” it added.

The report said that with the IMF actively looking into Pakistan’s financial management, there is very little chance of jumbo rate cuts in the next two monetary policies. “Today, a 200bps rate cut in each MP is the best-case scenario. The IMF has also flagged the banking sector’s heavy reliance on government lending and also cited global turmoil and tensions to opt for being more cautious.”

Pakistan’s gross financing requirement for FY25 is $18.8 billion, which is a nine-year low according to IMF data.

“This is contrary to the common perception that Pakistan has to pay a record high amount in the next few years,” said Topline Securities in a research report.

The significant fall in the gross financing requirement for FY25 is on the back of a contained current account deficit of $3.6 billion and relatively lower repayments in FY25 to the tune of $15.2 billion, it said.

Similarly, over the next three years (FY25-28), the IMF has lowered the gross requirement of Pakistan by a cumulative $4.2 billion, and over the next two years by $5.2 billion due to an anticipated fall in current account deficit, it added.