KARACHI: The rising demand due to higher debt servicing and repatriation of profits by foreign investors built pressure on the local currency, which saw the US dollar breaching the Rs280 and Rs281 thresholds in the interbank and open markets.

On Friday, the greenback traded at Rs280.35 and Rs281.86 in the interbank and open markets, gaining 25 and 24 paise, respectively.

Currency experts identified several factors behind the rupee’s weakening, but they observed that it was a controlled depreciation. The exchange rate has been stable for more than a year, hovering around Rs278 with slight fluctuations, and produced highly positive results as it eliminated panic from the currency markets.

“The Pakistani rupee needs to be competitive with the regional currencies like the Indian rupee, Bangladeshi taka, etc., which depreciated recently,” said Faisal Mamsa, CEO of Tresmark and a keen currency tracker.

Experts believe it is ‘controlled depreciation’

Since the inauguration of Donald Trump as the US president, the dollar has been appreciating against almost all currencies, including the British pound and euro. It impacted emerging markets like Pakistan and other regional countries.

“For the last couple of weeks, the deprecation started, but I believe it’s a controlled move, and the depreciation may not go beyond Rs282 in the interbank market,” said Mr Mamsa.

On Friday, the greenback reached Rs281.86 in the kerb, while the currency dealers believe more depreciation is expected.

“Pressure is mounting as dollar outflows have increased particularly due to increased imports and higher debt servicing,” said Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan.

He said the repatriation of profit by foreign investors is another reason for appreciation in the dollar rates.

“The SBP foreign exchange reserves have declined despite buying from the interbank market, which reflects the pressure. If the SBP reserves fell below $11bn it will certainly hit the exchange rate negatively,” he said. The SBP forex holdings saw an outflow of $152m in the week ending March 7, mainly due to external debt repayment.

However, another currency expert said the improved inflow of remittances during Ramazan would help the State Bank manage its reserves while the imports may slow down.

The remittances increased by 38pc year-on-year in February and 32pc during 8MFY25—traditionally, the inflows from overseas Pakistanis rose by 10 to 15pc in Ramazan.

Currency market players, however, said there was no shortage of dollars despite the depreciation.

“I believe the IMF will give its go-ahead for releasing the second tranche of $1.1bn, which would greatly support the country currently under pressure. It will improve the reserves of the State Bank which is a sign of exchange rate stability,” said Mr Mamsa.

Published in Dawn, March 15th, 2025