The rupee may continue its slide in 2024 as the country faces economic challenges such as soaring inflation, hefty debt obligations, a widening external financing gap and dwindling foreign exchange reserves, a report from Tresmark, a financial terminal, said.
The rupee, which has dropped 20 percent against the dollar this year, could depreciate another 5-10 percent next year as Pakistan suffers from near-zero growth, low productivity, higher repayments with fewer avenues for raising forex, the report said.
On December 15, 2023, the local currency closed at 283.26 per dollar in the interbank market. It ended on December 30, 2022, at 226.43.
“Challenging times ahead for rupee,” the report said. “In the current scenario, the economy is grappling with a slowdown in imports (fresh letters of credit openings), a decline in both exports and remittances, creating a stifling effect exacerbated by persistent inflation.”
Tresmark, however, warned that the currency’s weakness could fuel another round of inflation, posing a potential back-breaking burden for all stakeholders.
Average inflation for the first five months of the fiscal year was 28.62 percent, well above the central bank’s target of 22 percent for the current fiscal year.
… and if the SBP’s target of 22 percent for the whole year were to be considered, this would mean, average inflation for the next 7 months to be 17 percent,” Tresmark said.
This looks highly unlikely as a mean consensus for the remainder year is 22.50 percent – a whole 5 percent above SBP expectations.”
