The Pakistani rupee will finish the year poorest in Asia. Analysts expect the currency to plummet below 350 by the end of next year after falling 20% against the US dollar this year.
The Pakistani rupee will end the year as Asia’s worst-performing currency and continue to lose in 2024.
The currency has plunged 20% versus the US dollar this year, and economists warn its problems are far from over. Topline Securities Ltd. predicts the currency will fall to 324 Pakistani rupees by the end of next year, while BMI expects 350. It closed Monday at 285.64 Pakistani rupees.
“This looks like a currency that is set to adjust downwards,” said John Ashbourne, global economist at BMI in London, a Fitch Solutions firm. Pakistan’s high inflation and trade imbalance hurt the rupee.
A dollar shortage may also lead to alternative currency markets that arose last year after the central bank restricted foreign currency access to conserve reserves. After the rupee hit a record low in September, the authorities cracked down on unlawful dollar-premium trading. Sharp gains seem short-lived.
“It’ll be very hard in the long term to convince people to use the official rate if parallel markets give more value for a dollar,” said Ashbourne. “The authorities can push against the tide for a while, but not sustainably.”
Due to rising interest rates and only short-term lender agreements to support the external balance, Goldman Sachs Group Inc. cautioned the rupee will need a premium.
During the February elections, Topline Securities expects the incoming administration to sign a long-term IMF program next year, which might help the currency.
“Pakistan’s external account vulnerabilities can only be addressed effectively through a new and bigger IMF program,” analysts noted last month.
Conclusion
The Pakistani rupee is likely to finish the year as Asia’s weakest currency and lose until 2024. The currency has plummeted 20% versus the US dollar this year, and economists expect its problems to continue. TOPLINE Securities Ltd. predicts the currency will fall to 324 Pakistani rupees by the end of next year, while BMI expects 350. Pakistan’s high inflation and trade deficit strain the rupee. A dollar shortage might lead to alternative currency markets, which arose last year after the central bank restricted foreign currency access to maintain reserves. Goldman Sachs Group Inc. warned that rising interest rates and short-term lender agreements to support the external balance will necessitate a rupee premium. Topline Securities anticipates the incoming government to sign an IMF long-term program next year, which might help the currency.
