Pakistan’s ongoing floods have intensified a shortage of dollars in the country, raising concerns among foreign exchange dealers over potential pressure on the rupee, Bloomberg reported.
According to Saleem Amjad, CEO of Link International Exchange Co, many banks and exchange outlets have suspended operations after being submerged, making dollars difficult to access. The floods, which have killed more than 930 people and displaced over four million, are also affecting supply chains for food and foreign exchange.
The rupee posted modest gains in the interbank market on Monday, closing at 281.52 per dollar, up slightly from 281.55 in the previous session. In broader interbank trading, it was quoted at 282.55, compared with 282.60 previously.
A persistent dollar shortage could stall the rupee’s 25-session winning streak, the longest in two years, as importers and investors compete for limited greenback supplies.
Analysts warn that limited dollar availability could hinder imports and complicate government efforts to stabilize the economy ahead of an upcoming International Monetary Fund (IMF) loan review.
“Floods could strain external balances, foreign exchange reserves, and hence the rupee,” Bloomberg economist Ankur Shukla noted, adding that import pressures could further stress reserves, which currently cover less than three months of imports.
The rupee has gained 1.2 per cent against the dollar since hitting a low in July, supported by increased oversight from the army, an S&P Global Ratings upgrade, and a trade deal with the United States.
Amjad said the currency’s recent strength is encouraging some holders to retain dollars, anticipating higher prices if the rupee weakens.
The dollar shortage is expected to be temporary, with Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan (ECAP), forecasting a return to normal liquidity within 10 to 15 days. Analysts expect the rupee to remain stable around 281 per dollar this month, contingent on upcoming remittance inflows.
Remittances from overseas Pakistanis rose 7 per cent to $6.4 billion in the first two months of fiscal year 2025-26, with August inflows at $3.1 billion, up 7 per cent year-on-year but down 2 per cent from July. Pakistan’s foreign exchange reserves held by the central bank increased by $34 million to $14.336 billion as of September 5.
Despite the current stability, a survey by Topline Securities found that nearly half of participants expect the rupee to weaken to 285-290 per dollar by the end of the year.
