The Pakistani Rupee (PKR) expected to finish the year as Asia’s worst-performing currency after losing almost 20% versus the US dollar in 2023, is probably going to continue losing ground in 2024, according to Bloomberg.
Bloomberg Shocking Prediction Related To PKR
By the end of the year, the Bloomberg and Karachi-based Topline Securities Ltd. predict that the currency will drop to 350 rupees per dollar and 324 rupees per dollar, respectively.
The rupee “is set to adjust downwards,” according to an economist at a Fitch Solutions firm, with the trade deficit and inflation having a significant negative impact on the local currency.
Dollar Deficit and Its Repercussions
Parallel currency markets could also emerge as a result of a dollar shortage, Bloomberg reported.
It first surfaced when the central bank put restrictions on forex transactions last year in an effort to preserve its declining reserves.
September saw a historic low for the rupee, prompting the government to step up its crackdown on the black market for currency exchange.
The subsequent large gains don’t seem to have lasted long.
According to the economist, if unofficial markets offer more value for a dollar over time, it will be challenging to convince consumers to switch to the official rate.
“The authorities can sort of push against the tide for a certain amount of time, but they aren’t able to do that sustainably,” he added.
Economists and Business Firms Statements
Goldman Sachs Group Inc. issued a warning in the meantime, stating that the market will push for a premium for the rupee due to rising interest rates and short-term agreements with lenders to support the external balance.
On the other hand, Topline Securities in Pakistan believes that the next government will receive a better deal from the IMF in 2024, which could help the PKR.
The PKR is under pressure due to Pakistan’s onerous debt obligations and funding difficulties, according to Bloomberg.
The government nearly defaulted this year, and the situation is getting worse due to low foreign investments and the fastest-rising inflation in Asia.
Due to low remittances, the nation is becoming more and more dependent on foreign aid for dollar flows.
IMF’s $700 Million Tranche
This month, IMF approved a $700 million payment, averting the nation’s temporary default.
Nonetheless, there are still worries that its issues will persist well into 2024, given that the government is requesting additional support for its fragile economy.
To read our blog on “Fitch increase Pakistan’s rating to CCC from CCC- on July 10,” click here.