Rupee Could Depreciate by 12% Over the Next 6 Months

Pakistan’s currency is projected to decline 5-12% in the next 6 months, to somewhere between Rs 297 and Rs 321 per dollar in the interbank market by the end of the current fiscal year on June 30, 2024. The forecast comes on the back of a potential uptick in demand for the greenback to pay for imports and repay the maturing debt, according to reports from research houses.

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In a comprehensive report titled “Pakistan Investment Outlook 2024”, Taurus Securities, a subsidiary of the National Bank of Pakistan (NBP), Director Research Mustafa Mustansir said:

“We expect the US dollar to reach Rs296.6 by the end of FY24, averaging Rs291.4/$ for FY24. Our estimates account for the likely surge in the US dollar as substantial debt repayments approach early next year as well as in the run-up to elections. Also, aggressive monetary easing may put pressure on the rupee.”

Sana Tawfik, an economist at Arif Habib Limited, recently stated that her research firm believed that by the end of June 2024, the rupee would weaken to Rs321/$ due to a rise in demand for the dollar owing to significant import payments.

With the government determined to attain a modest 2-3% growth rate in GDP for FY24 and maybe a 7 percentage point cut in the policy rate of the central bank in the following year to 15%, demand for the dollar would increase, and pressure on the rupee would intensify.

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This will also have a negative impact on the prices of locally assembled vehicles. The auto sector is already witnessing a dreadful period due to a stark decline in sales which has pushed the industry back to 20-year-old levels. Although the industry stakeholders are optimistic that car sales will bounce back, a further depreciation in currency value would mean a further surge in car prices that won’t be too helpful in recovering the ailing sales.

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