Hold or remit? Pakistan rupee likely to weaken, set to fall below 86 against UAE dirham

Hold or remit? Pakistan rupee likely to weaken, set to fall below 86 against UAE dirham

The Pakistani rupee is set to weaken further in the coming months and is expected to fall below 300 against the US dollar despite Islamabad signing a loan agreement with the International Monetary Fund (IMF), said a new report.

According to the Institute of International Finance, the rupee, trading at around 288 (78.4 against the UAE dirham) on Wednesday evening, is likely to drop to 317 (86.4 versus dirham) in 2024 as the South Asian country could face a challenge in meeting its financing needs.

The rupee has weakened substantially in the past two years, falling from 162 in July 2021 to around 295 in May 2023.

The political turmoil in the country after the removal of the former government has exacerbated the economic condition in the country with inflation hitting record highs. Also, the country’s foreign exchange reserves have dropped substantially in the past two years before IMF approved the loan and the UAE and Saudi Arabia deposited funds with the central bank.

On July 12, the IMF approved $3 billion, providing much-needed external financial support. In addition, Saudi Arabia deposited $2 billion at the State Bank of Pakistan (SBP) while the UAE deposited another $1 billion. This resulted in Pakistan’s reserves doubling