Currency not expected to drop to 300 by year-end, contrary to earlier expectations: Report

Pakistan’s economy stabilizes amid improved external accounts and inflation decline

KARACHI: A recent report indicates that the Pakistani rupee is not projected to fall to 300 against the US dollar by the end of the year, contradicting previous forecasts. This stability is attributed to improvements in the country’s external accounts, a decline in inflation, and consolidation of fiscal policies, all bolstered by the new International Monetary Fund (IMF) program.

According to the Topline Research report, Pakistan’s liquid foreign exchange reserves are anticipated to reach $13 billion by June 2025, marking a significant recovery since March 2022. This rebound follows the successful completion of a Standby Arrangement with the IMF, which is expected to facilitate additional funding from both bilateral and multilateral sources.

The Pakistani rupee has appreciated by 2.6% in FY24 and 0.3% so far in FY25, benefiting from increased external stability. Projections suggest the exchange rate will stabilize between PKR 277-282 per US dollar by June 2025, and between PKR 295-300 by June 2026.

Inflation is forecasted to average between 7-8% during FY25, a sharp decline from the 23.4% recorded in FY24. This decrease is attributed to a higher base effect and improvements in food prices. Analysts predict that as inflation stabilizes, the State Bank of Pakistan may reduce the policy rate to between 12.5% and 13.5% by June 2025, down from the current 17.5%.

While the economy shows signs of stabilization, growth remains modest, particularly in the agricultural sector, which is expected to see a significant slowdown following a record growth of 6.4% in FY24. The outlook for key crops such as cotton and wheat is bleak, with expectations of contraction impacting overall agricultural performance.

As the economy navigates these challenges, the report emphasizes that the current external financing requirements are at a nine-year low of $18.8 billion, suggesting that Pakistan is well-positioned to manage its obligations moving forward.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Must Read