Fitch Ratings has said in a recent estimate that the Central bank of pakistan may allow the value of the Pakistani rupee to fall to deal with any kind of external pressure as the country's economic activities are gaining momentum. Krisjanis Krstins, director of Sovereign Ratings at international Rating Agency Fitch, has estimated the rupee to fall to Rs 285 per US dollar by june 2025 and to Rs 295 by the end of FY26.
This will happen if the currency weakens
Fitch has said, the Central bank of pakistan will allow the rupee to weaken gradually so that the pressure on the current account can be reduced as the economy gains momentum. The Pakistani rupee had hit an all-time low of Rs 307.10 against the US dollar in the first week of september 2023 amid rising cases of dollar smuggling from pakistan to neighboring countries.
Subsequent government action against illegal currency dealers helped the Pakistani rupee reach around Rs 277 per US dollar in the first half of 2024. Fitch also believed that a weakening currency would increase import spending more, but would help narrow the trade deficit and support the reserve buffer.
Pakistan's sovereign credit rating upgraded
Falling oil prices and improved confidence have boosted economic recovery after the country avoided default last year. prime minister Shahbaz Sharif's government has received several tranches from the IMF and Fitch recently upgraded Pakistan's sovereign credit rating in response to continued reform efforts.
Country's foreign exchange reserves decreased
Meanwhile, state bank of pakistan governor Jamil ahmed said last week that Pakistan's foreign exchange reserves had fallen by $2 billion due to repayment of foreign loans over the past few months, bringing the total reserves down to $10.6 billion. However, he said pakistan will receive $4-5 billion from external sources, including funds from global financial institutions, by the end of June. This will take the foreign exchange reserves to $14 billion by the end of june, up from the earlier estimate of $13 billion. He said imports rose to $5.7 billion in March, indicating a boom in economic activity. The governor also estimated that the economy here will grow by 3 percent in FY 2025, while it was 2.5 percent in FY 2024.
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