Dubai: Pakistan’s new Finance Minister is delivering on the tough talk – and it’s getting results. The Pakistan Rupee has been firming up, and is starting the week at 227.77 to the dollar and well off the all-time low of 240 just two weeks ago. (On December 31 last, the PKR had been at 178.25 to the dollar.)
Finance Minister Ishaq Dar’s latest statement since taking over last week was to confirm he would all measures necessary to strengthen the PKR by curbing speculative trades in the currency. This year, the PKR had dropped by more than 30 per cent, through a combination of internal dynamics and the dollar’s rapid gains in the global currency market.
Dar had earlier taken aim at reducing Pakistan’s interest rates and surging inflation as top priorities. All of that is rubbing off on the rupee. “In fact, the rupee had started to stabilise around 236 levels when it was revealed Dar would join the government,” said an FX analyst. “Now, the further firming up to 227 reaffirms the market’s faith that the FM would deliver on his plans.”
For Pakistan expats in the UAE, this means a narrowing of the remittance gain opportunities. The PKR’s rise in recent days has come against the backdrop of declines for a swathe of global currencies, as the dollar sticks to a higher level. FX sources talk about further volatility this week, with the pound - and even the euro - likely to come under renewed pressure.
"Pakistan is still awaiting the funds from the IMF and other sources as part of the rebuilding of the economy," said an analyst. "The FM's focus on the PKR to win back some of its lost strength is needed. The risks associated with a depreciating currency are way too heavy. But it's not going to be easy getting back to safety levels, with the dollar behaving the way it has been."
Multiple factors bring back PKR's strength
"The PKR gain in recent string against USD seems to be triggered by reduced oil prices coupled with various actions by the government, including reversal of major subsidy packages on energy products," said Naveed Ali, Finance Director, Zand Digital Bank.
But there is still work to be done, such as cutting the widening current account deficit through solid measures.