By June 2024, the brokerage Topline Securities anticipates that the parity between the Pakistani Rupee (PKR) and the US Dollar (USD) will be in the region of Rs. 320-340.
The trading business noted in its PKR forecast report that recent administrative changes have increased the value of the PKR in both the official interbank market and the free market.
According to the report, the PKR has been under pressure ever since the caretaker government assumed power due to anticipation that the non-political caretaker arrangement may enable the currency to flex to market forces in accordance with International Monetary Fund (IMF) guidelines. As a result, from August 14, 2023 to September 4, 2023, the PKR declined against the USD on the open market by 10% (from Rs. 296 to Rs. 328) and by 6% (from Rs. 288 to Rs. 307) in the interbank market.
It stated that the open and black markets, where the premium (open market vs. interbank rate) climbed from 1-2 percent to 6-7 percent, were primarily responsible for the current USD rise that occurred after August 14.
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In light of this development, the caretaker administration and the State Bank of Pakistan (SBP) implemented a number of actions to reduce open market demand.
As a result of these measures, PKR gained strength over the last 9 working days. In the interbank market, the PKR has appreciated by 4 percent, rising from Rs. 307 to Rs. 296 against the USD. Meanwhile, in the open market, the PKR has increased by 10 percent from Rs. 328 on September 04 to Rs. 298 as of September 18.
PKR has been one of the worst performers in the last few years. It fell 22 percent in 2022 while in 2023 it is down 23 percent so far against USD in spite of recent recovery.
The rupee has come under pressure as a result of the external financing deficit, the difficult global financial markets, and the local political unrest. At present, foreign exchange reserves are only enough to finance imports for fewer than two months.
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Future outlook
According to the research, aside from these administrative actions, the conclusion of the IMF review, which is anticipated in November 2023, will be a key factor influencing local currency moving ahead in the short term.
In addition, variables affecting the value of the PKR include global oil prices, USD inflows from multilateral organizations like the World Bank and Asian Development Bank, prompt rollover of maturing loans, and anticipated FDI in a few industries.
According to a recent Topline Research survey of significant market players, 38% of the respondents believe that the PKR/USD parity will be between Rs. 320 and Rs. 340 by June 2024.
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Around 25% anticipate it to be between Rs. 340 and 360, while 21% anticipate it to be between Rs. 300 and 320. On the other hand, 5% and 12%, respectively, predict that it will be over Rs. 360 and below Rs. 300.