Rupee logs biggest weekly gain in 93 weeks

KARACHI: The Pakistani rupee rallied on Friday and posted its biggest weekly rise in 93 weeks, helped by improved dollar supplies amid a crackdown on the black market dollar trade and an ease in the central bank’s forex reserves building strategy, with the credit rating upgrade by S&P Global also supporting.

The rupee rose 0.27 per cent to 283.45 against the dollar and was up 0.5 per cent this week, the highest gains in 93 weeks. The rupee increased Rs1.05 to 286.55 per dollar in the open market.

The recent appreciation of the local currency occurred after law-enforcement agencies targeted currency smugglers. This action followed a meeting between a group of foreign exchange companies and Major General Faisal Naseer, director general in the Inter-Services Intelligence, to discuss the decline of the rupee. Additionally, the State Bank of Pakistan’s slowdown in purchasing dollars from the currency market to build its reserves is also believed to have contributed to the rupee’s gains.

“The crackdown on hawala/hundi, strong remittances, and improving external numbers all seem to be helping. Overall, things look like they’re moving in the right direction,” said Saad Hanif, head of research at Ismail Iqbal Securities.

Blomberg, citing a client note by Citigroup Inc, said the SBP will continue to build its reserves, but at a slower pace that will not put excessive pressure on the rupee. The central bank has also eased its reserve building strategy this week, improving liquidity in the interbank market.

S&P Global Ratings upgraded Pakistan’s long-term sovereign credit rating from ‘CCC+’ to ‘B-’ on Thursday, assigning a ‘stable’ outlook. This marks the first return to the ‘B-’ rating since July 2022.

Pakistan’s dollar bonds extend rally

Pakistan’s dollar bonds have seen a rise as investor confidence in the country’s economy strengthens.The yield on the Eurobond maturing in 2031 declined 55 basis points (bps) compared to the previous week and 116 bps compared to the previous month, bringing it down to 9.0 per cent. Meanwhile, the yield on the bonds maturing in 2036 fell by 38bps on a weekly basis and 85bps on a monthly basis, now standing at 10 per cent.

The 2031 and 2036 maturities both gained around 1.6 cents to bid at 93.85 cents and 87 cents respectively, lifting them to their highest levels since early 2022, according to Reuters.

“The ratings upgrade reflects that Pakistan is now less reliant upon favourable macroeconomic and financial developments to meet its obligations. Pakistan has built its foreign reserves over the last 12 months, and near-term default risks have abated,” said Awais Ashraf, director of research at AKD Securities Limited.

“Government structural reforms, particularly related to the foreign exchange market and energy sector under the IMF’s Extended Fund Facility (EFF) of $7 billion, have played a vital role in restoring much-needed macroeconomic stability to the country,” Ashraf added.

At the core of S&P’s reassessment lies Pakistan’s improved balance of payments position. Foreign exchange reserves, which had fallen to a precarious $6.7 billion in 2022, have now rebounded to $20.5 billion as of July 2025, including central bank gold holdings, wrote Arif Habib Limited in a note.

“This turnaround, powered by IMF disbursements, bilateral deposits and a rare current account surplus, has significantly eased pressure on Pakistan’s external account. The reserves are now sufficient to cover all principal and interest repayments due in FY26, totalling $13.4 billion,” it said.