KARACHI: The rupee has been gradually depreciating against the US dollar, even as the greenback itself has fallen by around nine per cent on the dollar index against a basket of global currencies this year, according to market sources.
Since January, the rupee has slipped by Rs3.5, falling to Rs282.16 per dollar in the interbank market on Thursday from Rs278.5 in the first week of 2025. Currency dealers said pressure is mounting in the interbank market amid a persistent dollar shortage.
“Restrictions on imports have tightened. It is increasingly difficult to obtain permission from the central bank to open letters of credit,” said Atif Ahmed, a dealer in the interbank currency market.
He said that despite higher inflows of remittances and continued restrictions on both essential and non-essential imports, demand for dollars remains strong. Many in the financial sector believe that the State Bank of Pakistan (SBP) is actively managing the exchange rate to prevent sharper fluctuations.
SBP reserves surge on IMF tranche; $1bn UAE loan expected by May 31
“I believe the dollar could reach Rs284 in the interbank market by the end of June,” Mr Ahmed said.
Currency experts attribute the dollar shortage to exporters holding back their proceeds, particularly after recent border tensions and a brief armed conflict with India.
“Despite the ceasefire, the situation remains tense. Exporters are likely to wait for a further de-escalation before selling their proceeds,” said Faisal Mamsa, CEO of Tresmark, a global currency tracking platform.
He noted that while the dollar has lost nearly 9pc of its value on the dollar index this year, the rupee continues to weaken, suggesting that the local currency is facing “double trouble”.
Currency dealers said that banks have been advised by regulators to manage import payments through export proceeds. However, with exporters withholding their proceeds, many importers are struggling to open letters of credit.
Despite these restrictions, which have stifled economic growth, the trade deficit continues to widen. Policymakers have so far failed to strike a sustainable balance between imports and exports.
According to the Pakistan Bureau of Statistics, the trade deficit for the first 10 months of the current fiscal year widened by 8.8pc, rising to $21.35bn from $19.62bn in the same period last year. Imports increased by 7.4pc to $48.2bn from $44.9bn a year ago.
SBP reserves jump
Meanwhile, the SBP’s foreign exchange reserves surged by over $1bn to reach $11.446bn in the week ending May 16. The increase came after the receipt of the second tranche of $1.023bn from the International Monetary Fund under the Extended Fund Facility on May 13.
The country’s total foreign exchange reserves, including $5.202bn held by commercial banks, reached $16.649bn.
Additionally, financial sector sources said that Pakistan is expecting a $1bn loan from the United Arab Emirates. “I believe Pakistan may receive the $1bn loan from the UAE by the end of this month,” said Mr Mamsa of Tresmark.
Published in Dawn, May 23rd, 2025
