Rupee likely to depreciate by end-December

­KARACHI: The Pakistani rupee, holding steady at 278 per dollar in the interbank market, is expected to depreciate to approximately 295 by the end of 2024 and further to 325 by June 2025, according to analysts.

This week, the rupee traded within narrow ranges due to balanced supply and demand dynamics for dollars in the market. It closed at 278.37 against the dollar on Tuesday and saw slight fluctuations throughout the week, ending at 278.49 on Thursday before recovering losses to close at 278.37 on Friday. The currency market remained closed on Monday, July 1, owing to a bank holiday.“As Pakistan navigates these turbulent waters, we expect economic challenges to persist in the near term with elevated inflation and demand contraction,” noted Tresmark in a client note on Saturday.

“The policy rate is anticipated to remain between 17 per cent and 19 per cent by December 2024 to counter growth-related inflationary pressures,” the note stated.

“On the currency front, the USD/PKR is projected to reach around 295 by year-end and 325 by June 2025,” it added.

Positive indicators such as a narrowing trade deficit and a resilient stock market suggest a gradual economic recovery. An expected IMF agreement, anticipated to bring in between $6 billion to $8 billion, is seen as crucial for stabilizing the economy, according to Tresmark.However, potential implications from the Finance Bill’s tax measures and escalating fuel prices may further strain purchasing power and demand, the report cautioned.

Despite challenges, there are some optimistic developments. Exports grew by 10.54 per cent in the fiscal year 2024 while imports declined by 0.84 per cent, leading to a 12.32 per cent reduction in the trade deficit to $24.01 billion.