- Pakistani rupee expected to depreciate against the US dollar.
- Experts predict a depreciation of Rs2-3 per dollar.
- Rupee has depreciated three times more than its peers' currencies.
The rupee, expected to remain stable in the short term, experienced minor fluctuations against the dollar last week, closing at 278.21 on Friday with slight gains.
According to Tresmark, which referenced the Financial Markets Association (FMA) panel discussion, there’s a shared view that “if the economy grows, import pressure will rise and exert pressure on the external front”.
Experts anticipate the rupee could depreciate by Rs2-3 per dollar starting in July.
Tresmark noted a general agreement among experts that the rupee is slightly overvalued, stating, “The currency would be way lower had there been no import and capital restrictions,” and added that the IMF’s report suggests the rupee’s overvaluation.
Tresmark also mentioned, “There was a whisper that overreliance on a real effective exchange rate may not be a good gauge, as it largely revolves around the base year paradox.”
With Pakistan’s export-to-GDP ratio being one of the lowest, comparisons with Vietnam, Thailand, India, and Bangladesh suggest that competitive devaluation could boost exports.
The country’s low import-to-GDP ratio points to productivity issues rather than currency valuation. Tresmark highlighted that the rupee has depreciated three times more than its peers’ currencies, challenging the idea of competitive devaluation. The rupee/dollar exchange rate has shifted from 105 (2017) to 280 (2024).
A gradual and steady depreciation of the currency seems necessary moving forward.
Observers are also monitoring the rupee’s trajectory in anticipation of Pakistan securing a new IMF bailout. A staff-level agreement with the lender for a new program is expected by July.
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