Pakistani rupee: Asia’s worst-performing currency heads for another tough year
Pakistani rupee is set to end the year as Asia’s worst-performing currency and the losses are seen extending into 2024.
The currency has fallen about 20% against the dollar this year and analysts say its troubles are far from over. BMI expects the currency will weaken to 350 rupees per dollar by the end of next year, while Karachi-based brokerage Topline Securities Ltd.
sees it depreciating to 324 rupees per dollar. It closed at 285.64 rupees per dollar on Monday.
“This looks like a currency that is set to adjust downwards,” said John Ashbourne, global economist at BMI in London, a Fitch Solutions company, citing Pakistan’s high inflation and trade deficit among the factors putting pressure on the rupee.
Pakistan’s high debt payments and an external funding gap are weighing on the rupee.
The country was on the brink of a default this year, and falling investments from overseas and Asia’s fastest inflation are adding to its woes. Remittances also stay muted, making it more dependent on foreign aid for dollar flows.
The International Monetary Fund this month agreed to a $700 million payout, helping the nation stave off a default for now.
Concerns remain its challenges may extend well into 2024, with the government requiring more aid for its fragile economy.
Dollar Shortage
A dollar shortage may also lead to parallel currency markets that emerged last year after the central bank restricted access to foreign currency to preserve dwindling reserves. As the rupee slumped to a record low in September, the government intensified a clampdown on illegal buying and selling of dollar at a premium to the exchange rate.
