The Pakistani Rupee (PKR), poised to end the calendar year as Asia’s worst-performing currency, is likely to extend losses in 2024, having lost roughly 20 percent against the US Dollar in 2023, reported Bloomberg.
The currency is expected to fall to 350 rupees per dollar by the end of next year, according to BMI, and 324 rupees per dollar according to Karachi-based firm Topline Securities Ltd.
An economist at a Fitch Solutions firm said the rupee “is set to adjust downwards” with factors such as inflation and trade deficit weighing heavily on the local unit.
Dollar Shortage And Aftermath
A dollar shortage might also lead to the emergence of parallel currency markets, which first appeared last year when the central bank restricted access to foreign currency in order to maintain diminishing reserves. As the rupee fell to a historic low in September, the government tightened its crackdown on the informal currency market. The high gains that followed appear to have been fleeting.
The economist said it will be difficult to persuade buyers to adopt the official rate in the long run if unofficial markets provide more value for a dollar. “The authorities can sort of push against the tide for a certain amount of time, but they aren’t able to do that sustainably,” he added.
Meanwhile, Goldman Sachs Group Inc. cautioned that growing interest rates and short-term commitments with lenders to prop up the external balance will push the market to demand a premium for the rupee.
Conversely, Pakistan’s Topline Securities sees the next government to get a better deal from the International Monetary Fund in 2024, which might support the PKR.
Pakistan’s cumbersome debt obligations and funding issues are putting pressure on the PKR. This year, the government was on the verge of default, and low foreign investments and Asia’s fastest inflation are making it worse. Remittances are also low, leaving the country increasingly reliant on foreign aid for dollar flows.
The International Monetary Fund agreed to a $700 million payment this month, preventing the country from defaulting for the time being. However, concerns remain that its problems will last long into 2024, with the government demanding further assistance for its frail economy.