A report from Tresmark has forecasted that the Pakistani rupee may continue to weaken in 2024. The prediction comes as the country faces numerous economic challenges, including high inflation, substantial debt obligations, and a growing external financing gap.
Pakistan’s diminishing foreign exchange reserves compound these issues. The rupee, which has already fallen 20% against the dollar this year, is expected to depreciate by 5% to 10% next year. Contributing factors include near-zero growth, low productivity, and higher repayment obligations with limited options for raising foreign exchange.
As of December 15, 2023, the local currency stood at 283.26 per dollar in the interbank market, a significant decline from its value of 226.43 at the end of 2022. The report emphasizes the tough road ahead for the rupee, highlighting the slowdown in imports, the decline in exports and remittances, and persistent inflation as key challenges.
Potential Solutions and Future Outlook
Tresmark warns that the currency’s weakness could trigger another inflation surge, placing immense pressure on all economic stakeholders. With average inflation exceeding central bank targets, authorities are advised to create avenues for forex liquidity and use administrative measures to control price hikes.
Foreign analysts have also noted the possibility of a dollar shortage, leading to the formation of parallel currency markets. Pakistan’s reliance on short-term loans and assistance from the IMF and other lenders suggests that its economic woes may extend well into 2024. However, there is hope that the situation may improve with the anticipated financial inflows and the conclusion of the IMF’s loan programme review, which could bring about a tranche of around $700 million for Pakistan.
